South Korea's 40 trillion won rescue fund sells debt as airlines seek help

[SEOUL] A South Korean fund established to prevent major companies from going bankrupt during the Covid-19 pandemic is selling its first bonds, as struggling carriers seek support.

The 40 trillion won (S$47.56 billion) Key Industry Stabilization Fund, managed by Korea Development Bank, plans to take about 200 billion won in bids for 3.5-year notes on Tuesday, according to a person familiar with the matter. The bonds are guaranteed by the government.

South Korea created the fund in May to prevent companies from collapsing in seven key industries including aviation and shipbuilding that are big employers. Asiana Airlines, the nation's second-biggest carrier, will receive 2.4 trillion won from the fund after its stake sale collapsed.

If the fund significantly increases debt sales going forward, that could strain the government bond market, which is already planning record issuance this year, said Kim Ki-myung, credit analyst in Seoul at Korea Investment & Securities Co.

The country's No 1 carrier, Korean Air Lines, is also preparing to seek financial support from the fund, a spokesperson said by phone on Monday.

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