Liquidation market hit by ups and downs… ‘ABCP incident’ spreads criticism in Gangwon-do

More interest rate burden, deepening investor sentiment… Damage to local government trust

(Seoul = Yonhap Infomax) Reporter Hyerim Pi = Disturbance in the liquidation market spreads. This follows a rapid decline in investor sentiment due to the Gangwon-do asset-backed commercial paper (ABCP) default (debt default) while the interest rate burden has already increased ahead of the Bank of Korea’s base rate hike.

According to the investment finance industry on the 6th, concern is growing, with the interest rate on the three month bond securitization backed by ‘A1’ company rising more than 30bp in less than a week. In addition to the creation of institutions that exclude investment in securities by local governments, the risk is transferred to the short-term market closely related to securitization, affecting the general market.

◇ The effect of ‘Gangwon-do ABCP’ amid the burden of raising interest rates and closing the books
The interest rate on three month liquidity ‘A1’ has exceeded 5%. According to ‘Yonhap Infomax CP/Bond Integrated Distribution Information (Screen No. 4740)’, the three-month ‘A1’ liquid cargo issued this month by the Special Purpose Company (SPC) Invest Aloha First Car and Osria Park Second Cargo up. to 5.3% each the previous day. , trading at 4.92%. On the 27th, just over a week ago, even the 3-month ‘A1’ liquid cargo of real estate PF was completed at 3.8~3.9%, in contrast.

Invest Aloha First Car, a liquid cargo of beneficiary certificates, received an ‘A1’ rating from Hanwha Investment & Securities, and Osria Park Second Car, which uses convertible bonds linked to the construction of a Busan theme park as an underlying asset, has a credit to reinforce from Nonghyup and Kookmin Bank.

Short-term liquidity interest rates have been rising sharply in recent years. The possibility of a rate hike by the Bank of Korea next week is high and the market’s short-term burden has increased significantly before the year-end book close. As the maturity dates of the three-month commercial paper (CP) and short-term electronic bonds (STB) are pushed back to next year from October, the demand for investment from institutions looking to recoup funds at the end of the year will reduce.

The problem is that the recent Gangwon-do Guarantee ABCP incident further froze the market. It was a default when Gangwon-do failed to issue the primary ABCP refinancing of i-one, which was graded ‘A1’ by promising payment, and the local government’s guarantee was not fulfilled.

An official from the investment finance industry said, “The three-month commitment of ‘A1’ grade was spent at 4.5% on the 30th, but recently it increased to the level of ‘4.8 ~ 5.2%’. It seems that it has to add.”

In particular, since the ABCP is a large-scale issuance of KRW 25 billion, it further accelerates the contraction in investor sentiment. In the sense that it was issued in 5 billion denominations won, it was a product for organizations rather than individuals, but since it is of a considerable size, this is because a large number of investors are involved. Some are said to have been spent in retail through institutions, so attention is also focused on the possibility of a transfer to the recently revived market.

As a result of this situation, an increasing number of organizations ignore not only Gangwon-do but also local governments in general. Currently, according to Korea Credit Status, there are 5 cases of underwriting provided by local governments with credit enhancement, including I-One First, and 6 other local governments have issued underwriting guarantees.

Another industry official said, “Because of the ABCP incident in Gangwon-do, organizations have stopped investing in liquid cargo guaranteed by local governments in many cases.”

◇ Lower local government guarantees the reliability of liquid cargo, spread of responsibility in Gangwon-do
This is the background of strong criticism of Gangwon-do, which is at the center of the incident. Gangwon Province promised to pay the payment by 3 pm on the maturity date if the loan is not repaid on the due date of the loan contractual obligations related to ABCP, but this was not achieved.

Gangwon-do said he would fulfill his promise to pay the payment after relieving the debt burden through the rehabilitation procedure of Gangwon Middle East Development Corporation, ABCP’s lender. As local residents’ taxes become intertwined, corporate rehabilitation appears to be prioritized as a way to reduce the burden.

However, the market response is cold as it is a different response to the original promise. In particular, the disappointment is growing as it has received high trust in the capital market thanks to its status as a local government.

An IB industry official said, “If it was a general company, even the guarantee company would have failed,” said an IB industry official.

As the burden of interest rates has already increased and the ABCP crisis in Gangwon-do has added to the weakening of investor sentiment, the underperformance of securities is also referred to as the Gangwon-do wildness. This is because the result of irresponsible actions taken by Gangwon-do has increased even more in the sense that market volatility has recently increased over interest rate hikes and inflation.

An industry official said, “In fact, in a political situation where the current Governor Kim Jin-tae is going to close the business of former Gangwon-do governor Choi Moon-soon, the number of financial victims around ABCP is increase. See,” he said. He said.

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This article was submitted to the Infomax financial information terminal at 11:36, two hours earlier.

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