Korea Credit Guarantee Fund said on March 29 it has issued a collateralized bond obligation (CBO) worth 415.1 billion won for the first time to support SMEs and construction firms in securing funds, with 280.1 billion won going to support SMEs.

The Fund said the issuance is part of the 1 trillion won worth of CBOs it plans to issue this year. The CBO issuance will be of great help to 18 construction firms and 60 businesses who joined the CBO to ease their liquidity problems, the fund said.

The 152 will benefit from the 280.1 billion won secured through the CBO for SMEs and those firms with great potential growth will continue to be able to secure long-term funds.

A special characteristic of the CBO this time is that SMEs were able to secure funds at 0.5 percent lower than the usual rate charged on their loans through the operation of the market-friendly guarantee enabling SMEs to expand their direct access to the financial market, the fund said.

The funds secured through the CBO have been provided in areas considered to be future growth engines — 187 billion won to 113 firms. Also, 96 firms with great growth potential or job-creating ability will benefit from 135.5 billion won.

Director Kwon Young-taik, in charge of the guarantee business of the Fund, said they plan to issue CBOs worth 3 trillion won for construction and SMEs since the Fund can only do its best to help those firms secure stable, long-term funds by expanding their access to the financial market.

In the meantime, the Fund said it issued a second CBO for 188 firms amounting to 305.5 billion won on April 27.

As in the first CBO that brought in 280.1 billion won in March, the second CBO was issued to help SMEs expand their access to the financial market at a 0.5 percent lower interest rate.

The CBO also provided 125 firms in the areas of exports, green growth, and great growth potential with 194.5 billion won in support funds and 60 percent of the fund going to firms with great growth potential and job-creating potential.

Choo Dong-hwa, manager of the CBO Department, said the paradigm for the issuance of the CBOs was changed to one that seeks out firms with great growth potentials to help them secure stable long-term funds at lower costs and away from cutting issuance interest rates and other factors centered around the suppliers.

In the meantime, the Fund opened the way for private investors in social overhead capital to provide for their stable long-term funds at a lower cost in the financial market.

On April 19, the Fund met with financial institutions, construction firms involved in the construction of the Changwon-Busan Highway, and private investors at the Shilla Hotel in downtown Seoul and signed a contract on cooperation providing for the SOC collateral guarantee worth 130 billion won.

Under the agreement, the Fund will issue a guarantee for 300 billion won and supply the balance of the funds amounting to 130 billion won through the means of the SOC collateral guarantee.

The SOC Collateral Company Guarantee is the first guarantee issued by the fund against the asset-backed securities of a special collateral company so that private investors in SOC projects can secure funds directly at lower interest rates.

The Changwon-Busan Highway, being built by Hyundai Construction and funded by private investors, links Wanam-dong, Changwon City and Saengkok-dong, Busan, stretching for 22.48 km with four lanes on each side. Kookmin Bank arranged the financing with HMC Investment and Securities as the lead manager in the issuance of asset-backed securities. The project is now one-third completed with the two remaining stages still under construction. The first stage has been opened to traffic.