HF launches ‘PF-ABCP Long-Term Loan Conversion Guarantee’

- Worth of KRW 1.5 trillion to resolve refunding risk of otherwise sound PF businesses.

Korea Housing Finance Corporation(HF, CEO Choi Joon Woo) announced on March 16 that it launches a ‘PF-ABCP Long-Term Loan Conversion Guarantee’ program on the following day. The guarantee product is for construction companies and security firms with refunding issues, such as PF-ABCP issuance, due to bearish short-term money market.

 * PF-ABCP(Project Financing Asset Backed Commercial Paper) 

  ☞  A commercial paper, typically with 3-month maturity, issued to finance a PF business and collateralized by loans to developers.

The program is a part of government policy implementation stated in the ‘Economy Policy Direction in 2023’, under which HF provides total worth of KRW 1.5 trillion guarantees to builders and security firms faced with head-wind due to sluggish real estate market, so that they can solve liquidity issues by converting their short-term debts to long-term ones.

 * 「2023 Government Policy Report」(FSC, Jan 30, 2023), 「CP, Short-term Financial Market & Real Estate PF Risk Monitoring Meeting」(FSC, March 6, 2023)

To deliver better guarantees, HF offers extended application period with expanded guarantee ratio. Guarantee application can be initiated even before the completion of land purchase and by builders who have already started sale-in-lots. In addition, by increasing the guarantee ratio from 90 percent to 100 percent, it is designed to alleviate burdens on the lenders(banks).

To be noted, however, as the program is to support viable PF businesses, HF will closely look into business feasibility of each application. Moreover, by having builders and security firms to retain the obligation to buttress their credit under the previous loans, HF sees to it that the guarantee will not lead to moral hazard.

HF CEO Choi said, “HF will support sound sailing of PF businesses with sound profitability by helping them to resolve refunding risk. Going forward, we will do our utmost to prevent real estate PF market from becoming a weak link of the economy and to facilitate soft-landing of the real estate market.

HF holds an information session for construction companies and security firms on March 17 to provide details of the guarantee and to promote the program. Businesses, of which funding was made before Dec 21, 2022, the release date of the  related government policy*, are eligible for the program. Application opens on March 17, 2023.

 * 「Economy Policy Direction in 2023」(Related government authorities, Dec 21, 2022.)