P-CBO Issued to Improve Liquidity for Construction Contractors

Home builders facing difficulties due to the glut of unsold apartments are now able to secure relief funds through guarantee support by KHFC.

On December 18, KHFC will issue 400 billion won in Primary-Collateralized Bond Obligations (P-CBOs) using corporate bonds issued by home builders as underlying assets through credit enhancement by the Housing Finance Credit Guarantee Fund.

The latest issuance of P-CBO is one of the government's measures for construction firms announced on October 21. Corporate bonds issued by construction firms will be underwritten by securities firms. Then, they will be securitized through a Special Purpose Company (SPC) after credit enhancement.

An official at KHFC said, "The corporate bonds of individual construction firms that were not accepted in the market will be bundled together and issued as high-rated securities to help construction firms raise funds and provide investors with sound capital investment opportunities. It will also do much to prevent uncertainties in the home building market from spreading to other sectors of the economy."