Gyeonggi Housing and Urban Corporation (GH) will issue bonds and debentures worth 3 trillion won to secure funding for the third phase of new city development. The corporation plans to coordinate the timing of the issuance after conducting market demand surveys. Given the large-scale issuance in trillions, it is expected to be issued in multiple stages.
According to Gyeonggi Housing and Urban Corporation and the financial sector on the 12th, the corporation is reviewing the issuance of bonds and debentures to secure funding for the third phase of new city development. It plans to start issuing them in early next year. A market official noted, “We have started reviewing the bond and real estate market conditions for issuing bonds and debentures and plan to issue them sequentially after determining the timing and volume.” The issuance scale is 980 billion won for new issuance and 2.5 trillion won for refinancing, totaling 3.03 trillion won.
The corporation has already issued over 7 trillion won in bonds and debentures. If 980 billion won is newly issued next year, the total issuance scale of the corporation will exceed 8 trillion won. According to NICE Credit Rating, as of the end of June this year, Gyeonggi Housing and Urban Corporation's total borrowing fund is 9.1506 trillion won, with short-term borrowing funds maturing within one year at 2.6057 trillion won. Of the total borrowing funds, 7.06 trillion won is in bonds and debentures. These are bonds issued to secure funding for new city development in the metropolitan area, including the third phase of new cities. Looking at the issuance scale of bonds and debentures by region: ▲ Yongin Platform City urban development project (2.67 trillion won) ▲ Hanam Gyosan District (1.27 trillion won) ▲ Namyangju Wangsuk District (1.05 trillion won) ▲ Goyang Changneung District (800 billion won) ▲ Gwangmyeong Hakwon District (680 billion won) ▲ Gwacheon Gwacheon District (390 billion won) ▲ Ansan Jangsang District (200 billion won).
The reason Gyeonggi Housing and Urban Corporation is pushing for a large-scale issuance of bonds and debentures next year is that the government is accelerating the third phase of new city development projects, necessitating funding related to these projects. The government plans to break ground on all districts of the third phase of new cities, including Wangsuk in Namyangju and Daegang in Bucheon as well as Changneung in Goyang, within the year and begins offering units in the third phase of new cities starting in January next year. A corporation official explained, “The corporation will participate in all stages of land compensation and implementation of the third phase of new city districts along with Korea Land and Housing Corporation (LH).” The supply amounts for the third phase of new cities by district are Namyangju Wangsuk 66,000 units (12.69 million square meters), Goyang Changneung 38,000 units (7.89 million square meters), Hanam Gyosan 33,000 units (6.86 million square meters), Bucheon Daegang 19,000 units (3.45 million square meters), and Incheon Gyeyang 17,000 units (3.33 million square meters), totaling 173,000 units (34.22 million square meters).
Gyeonggi Housing and Urban Corporation's push for a large-scale issuance of bonds and debentures is also due to the change in the issuance environment being favorable following the Bank of Korea's interest rate cuts, which have lowered market interest rates. On the 28th of last month, the Monetary Policy Committee of the Bank of Korea broke the market's expectations of interest rate freezes and lowered the rates for the second consecutive month. Consequently, the benchmark rate was adjusted down from 3.25% to 3.0%, and market interest rates in the bond market fell as well.
According to the Korea Financial Investment Association, the average interest rates (market average rates) for Gyeonggi Housing and Urban Corporation's bonds and debentures with a credit rating of AAA prior to the interest rate cut on Nov. 27 were 3.081% for two-year bonds, 3.013% for three-year bonds, and 3.045% for five-year bonds. However, on the 11th, the two-year bond stood at 2.92%, the three-year bond at 2.857%, and the five-year bond at 2.899%. After the rate cuts in November, the rates decreased by 0.14% to 0.16% depending on maturity. A financial investment industry official noted, “Since bonds and debentures have a high credit rating and market interest rates have decreased significantly, if we were to issue a bit more than the market average rate, the market should be able to absorb such a larger issuance.”