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Fitch Rates Small Business Corporation's USD Notes 'AA-(EXP)'
August 22, 2016 / 7:16 AM / a year ago

Fitch Rates Small Business Corporation's USD Notes 'AA-(EXP)'

(The following statement was released by the rating agency) HONG KONG, August 22 (Fitch) Fitch Ratings has assigned Small Business Corporation's (SBC, AA-/Stable) proposed senior unsecured US dollar notes an expected rating of 'AA-(EXP)'. The net proceeds from the sale of the notes will be used for general corporate purposes including repayment of existing obligations. The final ratings on the proposed US dollar notes are contingent upon the receipt of final documents conforming to information already received. KEY RATING DRIVERS The notes issued will be direct, unconditional, unsubordinated and unsecured obligations of SBC and will rank pari passu with all other present and future outstanding unsecured and unsubordinated obligations of SBC. The notes are rated at the same levels as SBC's Issuer Default Rating (IDR). SBC's ratings are equalised with the ratings of South Korea (AA-/Stable) due to its strong links to the sovereign and high probability of extraordinary government support, if needed. The entity's policy is dictated and closely monitored by the government of Korea. The entity's main policy role is to manage and operate the Fund for Establishment and Promotion of SMEs (SME Fund) and act on behalf of the SME Fund (for example, issuing bonds) under its corporate status. The state is by law required to replenish deficits in the SME Fund when the fund's reserves fall short. State support is also evident in the annual capital contributions by the government, which help the fund to partially cover operating losses arising from a negative interest-rate spread. SBC has a mandate to implement government policies to support the development and growth of SMEs, including start-ups, small businesses and new technology developers, in Korea. SMEs lacking in collateral and with short track records may find it difficult to get funding from the private sector. The SME Fund provides funding for SMEs not served by private-sector financing. SME Fund loans are intended to supplement commercial loans, have longer maturities, and are provided at below-market interest rates. SBC also supports SMEs by providing non-financial assistance. SBC is wholly owned by the state, and operates under the aegis of the Small and Medium Business Administration (SMBA), which is heavily involved in SBC's annual budget supervision and performance evaluation. SBC's management is appointed by the government. The entity is subject to checks by the government auditor, while a government-appointed external auditor conducts checks on the SME Fund. RATING SENSITIVITIES Any rating action on SBC's IDR would result in similar rating action on the rated notes. A positive rating action on the sovereign, in conjunction with continued strong support from the state, would lead to a similar change in SBC's rating. A sovereign downgrade, significant changes that would lead to a dilution in state ownership and public control, or evident weakening of links with the government, including erosion of the importance of the SME Fund's public-policy role and budgeting relationship with the government, could trigger a downgrade. Contact: Primary Analyst Lin Pei Associate Director +852 2263 9912 Fitch (Hong Kong) Limited 19/F Man Yee Building 68 Des Voeux Road Central, Hong Kong Secondary Analyst Terry Gao Director +852 2263 9972 Committee Chairperson Raffaele Carnevale Senior Director +39 02 879087 203 Date of Relevant Rating Committee: 9 August 2016 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available on Applicable Criteria International Local and Regional Governments Rating Criteria - Outside the United States (pub. 18 Apr 2016) here Rating of Public-Sector Entities - Outside the United States (pub. 22 Feb 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1010623 Solicitation Status here Endorsement Policy here ail=31 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.

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