Public sector’s reliance on bonds jumps in 2011

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Public sector’s reliance on bonds jumps in 2011

Bond sales at public corporations have nearly doubled in three years as they increasingly resort to issuing debt to help finance state development projects, financial sources said yesterday.

The value of outstanding bonds issued by state land developer LH Corporation and other public corporations under the central and provincial governments amounted to 283 trillion won ($250 billion) as of Friday, according to the sources.

The figure is up 89 percent from the 150 trillion won posted at the end of 2008 and represents a whopping 87 percent of the government’s 326 trillion won budget for next year.

The amount of bond issuance by public corporations stood at 210 trillion at the end of 2009 and 261 trillion won as of the end of 2010.

LH held the largest amount of outstanding bonds worth 57 trillion won, trailed by the Korea Housing Finance Corporation with 36 trillion won, Korea Finance Corporation with 32 trillion won and Korea Electric Power Corporation with 25 trillion won.

Market watchers said public corporations’ outstanding bonds have risen at an alarming rate as they sell debt to fund state projects on behalf of the government, whose bond sales are subject to a legal ceiling. Bonds sales by public companies are likely to continue to rise next year as they have around 40 trillion won worth of bonds that are set to mature.


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