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Fitch affirms korea housing finance corporation at aa stable


(The following statement was released by the rating agency) HONG KONG/BARCELONA, September 05 (Fitch) : Fitch Ratings has affirmed Korea Housing Finance Corporation's (KHFC) Long-Term Issuer Default Rating (IDR) at 'AA-' and Short-Term IDR at 'F1+'. The Outlook on the Long-Term IDR is Stable. KEY RATING DRIVERS KHFC's ratings are equalised with the ratings of Korea (AA-/Stable/F1+) due to its public sector status, ownership by the state, the government's strong control over the entity and KHFC's strategic ties with the state, which result in a strong likelihood of extraordinary state support, in case of need. Fitch has classified KHFC as a dependent public sector entity. Fitch has applied a top-down approach in its analysis of KHFC. KHFC is 100% owned by the state, and closely controlled and supervised by the government. It reports to the Ministry of Strategy and Finance and is supervised by Korea's financial regulator, the Financial Services Commission (FSC). Its president, who is appointed by the government, works as a public servant attached to the FSC. Its auditor is also recommended and appointed by the government. KHFC has a mandate to facilitate access to housing finance for low- and middle-income earners in South Korea. The government policy requiring Korean financial institutions to raise fixed-rate amortising mortgage loans to 30% of their outstanding portfolios by end-2016 enhances KHFC's policy role. It is widely expected to take a leading role in providing funding to achieve this target. Article 51 of the KHFC Act requires the state government to replenish the entity's deficits when KHFC's own reserves are not sufficient to absorb losses. State support is also evidenced by the government's capital injections in 2012 and 2013, which helped the entity to meet its regulatory required capital adequacy ratio of 8%. KHFC's strong liquidity and funding status is backed by its strong reputation in both the domestic and international capital markets. Its funding channels are also well-diversified, including mortgage-backed securitisation, covered bonds, senior unsecured bonds, and commercial paper. KHFC suffers from funding mismatch as its loan portfolio has maturities ranging from 10 to 30 years but it is funded by commercial paper and bonds with relatively short tenors. Nevertheless, the mismatch is partly mitigated by the entity's continuing securitisation of its mortgage loan portfolio and shorter effective mortgage tenor due to Koreans' tendency for early loan repayment. RATING SENSITIVITIES A positive rating action on the sovereign, in conjunction with continued strong support from the state, would result in a similar change in KHFC's rating. A downgrade of Korea's ratings, significant changes that result in a dilution in state ownership and state control, or weakening in KHFC's links with the government, including the importance of the entity's public policy role and budgeting relationship, could trigger a downgrade. This is because KHFC, under such circumstances, would no longer be classified as a dependent public sector entity and, therefore, no longer be credit-linked to the sovereign rating. Contacts: Primary Analyst Terry Gao Director +852 2263 9972 Fitch (Hong Kong) Limited 28th Floor, Two Lippo Centre 89 Queensway, Hong Kong Secondary Analyst Fernando Mayorga Managing Director +34 93 323 8407 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.this site Additional information is available at this site Applicable criteria, 'Tax-Supported Rating Criteria', dated 14 August 2012 and 'Rating of Public Sector Entities - Outside the United States', dated 4 March 2014, are available at this site Applicable Criteria and Related Research: Rating of Public Sector Entities - Outside the United States - Effective from 4 March 2013 to 4 March 2014 here Tax-Supported Rating Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW. FITCHRATINGS. COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Lpc european lenders feel the pressure as leveraged loans dry up


May 18 A lack of new European leveraged buyout loans is forcing banks to become increasingly competitive in order to win mandates, which is driving down underwriting fees and creating more risky loan structures. Sponsors are taking advantage of low deal-flow to drive very aggressive, highly levered structures from large groups of competing banks when they are bidding for a company in auction stage. Around 18 banks are backing one of the private equity trees on the sale of European glass bottle maker Verallia, while around 15 banks are competing to fund Nordic Capital's bid for Germany-based wheelchair manufacturer Sunrise Medical. Leveraged multiples are being pushed, not only for the larger deals but the smaller deals too, frustrating many banks uncomfortable with the high levels of risk. Bankers are working on a first and second-lien loan structure totalling 6.5 times leverage for Sunrise Medical, which has 40 million euros ($45.60 million) of Ebitda."There are not enough deals and banks are being stupid, it is going to get ugly," a leveraged loan banker said. Banks are also offering covenant-lite loans on large and small credits and very aggressive documentation around a borrower's ability to raise extra debt for acquisitions and dividend payments.

At such aggressive levels, some bankers question whether lenders will be able to remain in each process, or if the risky structures will see a majority of banks fall away."On Verallia, there are 18 banks but in reality only two or three banks are actually reading the papers and commenting, while the others are just saying yes. In a lot of these auction processes, many of the banks are driving aggressive terms to keep the sponsor happy but then fall off a cliff and stop returning calls at the eleventh hour when they read the documents and realise how bad things are," a second loan banker said. While some banks are able to offer very aggressive terms on structure and pricing, it is unclear whether institutional investors will buy the paper despite having a vast amount of cash to put to work. Having lost money on a number of deals last year, including French retailer Vivarte, investors have kept a certain amount of discipline when it comes to investing in riskier credits.

A number of bankers are hoping some of the super-aggressive banks will be left long and unable to sell paper on a deal, in order to bring some discipline back to the market."Some bank is going to get pasted with one of these deals, which won't be good but it needs to happen to shake things up a bit," the loan banker said. UNDER PRESSURE

US banks are also experiencing pressure on structure and pricing but they have so far held out on underwriting fees. A more over-banked European market is feeling the pressure on fees and some lenders are offering borrowers discounts in order to undercut the competition. A reasonable fee on an underwriting is between 2 percent and 2.25 percent but some banks, including investment banks, have dropped fees to as low as 1.5 percent to 1.75 percent, according to bankers."When there are so many banks and so few deals, there is going to be pressure on fees. You can try to fight it but there are idiots out there willing to do things cheaply and as a result, we will all suffer," a third banker said. Sponsors and banks are also exerting as much control as possible when it comes to the allocation of deals. Some sponsors are having a large say over the process to make sure paper is kept with their most favoured funds, at the expense of other investors. Where sponsors are leaving it to the banks to sort out allocations, some banks are holding back paper in an effort to sell it on at a profit after the deal has been allocated and traded higher on Europe's secondary loan market. Despite being a questionable process, it is likely to continue to occur, especially if banks try to make up for lost underwriting fees."Banks are typically not charitable institutions as they have a bunch of shareholders that need to be kept happy, but it is obvious that if there is not enough out there then banks will be scrabbling to do things and things will get tweaked in a borrowers favour, which is painful and challenging," a fourth banker said. ($1 = 0.8771 euros)