Standard & Poor’s Ratings Services has assigned its ‘A-‘ senior unsecured long-term foreign currency debt rating to Korea Development Bank’s (KDB; foreign currency rating A-/Stable/A-2) US$500mn notes due September 2013.
“Standard & Poor’s issuer credit ratings on KDB are based on the bank’s strong public policy role,” says credit analyst Takahira Ogawa, director at Standard & Poor’s sovereign credit ratings. The bank is a key financial instrument of the Korean government (foreign currency A-/Stable/A-2; local currency A+/Stable/A-1) for implementing its industrial policy objectives, and is also an important tool in carrying out the government’s financial market stabilization effort. “In the past five years, KDB has been an important source of liquidity when the financial markets were not functioning properly,” Ogawa adds.
The ratings on KDB are also supported by its sole ownership by the government. The government controls its board and sets its strategic objectives. In addition, Article 44 of the KDB Act requires the government to replenish the bank’s reserves if they are depleted by losses. Although not a guarantee, this article underpins the bank’s solvency. KDB has enjoyed repeated capital support from the government in the past.