RPT-Fitch Rates KoFC's Senior Unsecured USD Notes 'AA-(EXP)'
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Aug 15 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Korea Finance Corporation's (KoFC, AA-/Stable) proposed long-term senior unsecured USD-denominated notes an expected 'AA-(EXP)' rating. The notes will be issued under the bank's existing USD5bn shelf programme, registered on 13 June 2013 at the US Securities and Exchange commission. The proposed tenor is five years but the issue size has yet to be determined.
The proceeds will be used for KoFC's general operations, including extending foreign currency loans. The final rating is contingent upon the receipt of final documents conforming to the information already received.
Key Rating Drivers
The bonds are rated at the same level as KoFC's Long-Term Issuer Default Rating (IDR) of 'AA-' which in turn is equalised with the IDR of South Korea. The rating reflects Fitch's belief of an extremely high probability of support, if needed, from the government for KoFC. This is because the Korean government is legally obliged to cover KoFC's losses should the latter's capital reserve funds fail to do so, as per Article 31 of the KoFC Act. Rating Sensitivities
Changes to South Korea's IDR or the KoFC Act will affect KoFC's ratings directly. KoFC's ratings are not likely to be affected by the government's plan to reorganise policy financial institutions including KoFC, which will be announced by late August. This is because the reorganisation plan is not likely to include changes to the de-facto solvency guarantee clause in KoFC Act. Should the reorganisation plan lead to KoFC being dissolved (eg by merging KoFC into Korea Development Bank (AA-/Stable), Fitch expects the government to provide an arrangement for the notes to continue to carry the de-facto solvency guarantee. KoFC is 100%-owned by the government and is mandated to promote stability in domestic financial markets and to provide financial support to new growth industries and SMEs. KoFC had total assets of KRW71.2trn at end-2012 and has a 90.26% stake in KDB Financial Group.