The Korea Securities Finance Corporation (KSFC) is revitalizing the securities industry by lending M&A funds to stock firms at a low interest rate and cutting its loan rates.
The corporation announced the plan on January 22. According to the company, an acquirer of a stock company can take out a cheaper loan via the corporation during a friendly M&A between stock firms within a limit of 2 trillion won (US$1.86 billion).
The loan is divided into one half secured loan and one half unsecured loan. The former provides a prime rate of 10 basis points, and the latter offers a prime rate of as high as 2.8% for up to a year. For example, the annual borrowing cost can be reduced by 3 billion won (US$2.8 million) when 300 billion won (US$279 million) is lent.
At the same time, the KSFC is going to lower the loan rate and investor deposit trust fee so as to alleviate the burden on securities companies in deteriorating business environments. “It is expected that the interest costs would be reduced by approximately 8.8 billion won [US$8.1 million] each year, 6.3 billion won [US$5.8 million] through the loan rate cut and 2.5 billion won [US$2.3 million] by means of trust fee reduction,” the corporation explained.