Gov¡¯t to back 80% of corporate bonds

The state-run Korea Development Bank has decided to undertake nearly 80 percent of corporate bonds that are to mature next year, which are worth a total of 20 trillion won.

In this connection, companies that could repay 20 percent of their maturing bonds will be able to reissue bonds thanks to the emergency capital-market measure of the government. The nation's top four business groups will also benefit from the measure.

The government held a meeting of economic ministers Dec. 26 and made the decision, which will remain effect during 2001. Lee Jong-Ku, director general of the financial policy bureau of the Ministry of Finance and Economy, said that a total of 65 trillion won worth of bonds will mature next year and that about 25 trillion won worth are considered as bonds that cannot be reissued.

"For this reason, Korea Development Bank will directly undertake them, which includes companies affiliated with the four leading groups," he said.

The Bank of Korea will finance KDB to purchase corporate bonds. If the bank needs more money, KDB is expected to raise its capital. The government also plans to form an investment fund exclusively for bonds by units of 10 trillion won.

With this emergency measure, most domestic companies, except firms under corporate workout and companies under court mediation or subject to liquidation or those that can issue bonds with A or better ratings, will benefit.

Choi Young-Hae moneychoi@donga.com