South Korean authorities, struggling to revive the debt market, have asked public and financial issuers sharing high-quality sovereign credits to refrain from issuing domestic bonds until the local market recovers. of the panic caused by the default of a municipal debt.
The Ministry of Economy and Finance asked the Ministry of Commerce, Industry and Energy to advise Korea Electric Power Corp. (KEPCO), to Korea Gas Corp. and other utility companies to take on foreign debt or seek bank loans instead of worsening the market with new bond issues, a senior finance ministry official said on Sunday.
Soaring bond issuance by utilities amid a struggle to manage operations due to soaring fuel prices has added to the glut in the debt market as prices have fallen due to the rapid rise base interest rates.
KEPCO, with a AAA credit rating, has issued 23 trillion won ($16 billion) so far this year.
To ease tensions in the money market, the Ministry of Finance will also sharply reduce new issues to reduce supply and help normalize prices.
The Financial Services Commission has ordered public banks to keep issuance to a minimum for the time being. The main financial regulator has also advised private banks to raise the necessary funds from abroad.
Until recently, Korean financial authorities prohibited local banks and other financial services companies from seeking foreign borrowing due to the risk of currency hedging amid the fall of the Korean won against the US dollar. But small business liquidity problems that can cause chain failures and financial risks have become more pressing.
By Kim Jung-hwan, Moon Jae-yong and Cho Jeehyun
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