Korea Credit Guarantee Fund Credit Guarantee Chanki Park

Korea Credit Guarantee Fund Credit Guarantee Chanki Park System Chief, International Affairs Team

Chapter 1 Overview of Credit Guarantee System

Type of Credit Guarantee Program Type of C. G Indirect Financing Direct Financing Credit Between Enterprises Others Guarantee for Bank Loans Guarantee for Payment Guarantees of Banks Guarantee for Bond Issuance Guarantee for Transaction Liabilities Guarantee for Commercial Bills Related Liability Bank Loans, Overdraft account Discount on Commercial Bills Payment Guarantee Corporate Bond (P-CBO) Transaction Liabilities . Notes Payable, Mortgage Bills, Notes Receivable Guarantee for Performance, Guarantee for Tax Payment

Basic Framework u Guarantee for Bank Loans ① Apply for Credit Guarantee Enterprises KCGF ③ Issue Credit Guarantee Banks ② Credit Investigation ④ Loans u Guarantee for Transaction Liabilities ④ Supply goods Buyer Supplier ⑤ Pay for each transaction ① Apply for Credit Guarantee ② Credit Investigation KCGF ③ Issue Credit Guarantee

Guarantee Outstanding • By Type of Guarantee Type US $ billion Proportion Bank Loans 25. 5 89. 3% Transaction Liabilities 2. 4 8. 3% Performance 0. 4 1. 5% Others 0. 3 0. 9% 28. 5 100. 0% Total As of June 2007

Change in Guarantee Composition

Guarantee Outstanding • By Industry • By Use • By Size : SMEs takes 99. 9% As of June 2007

Guarantee by Rating As of Dec 2006

Growth in Guarantee Outstanding Leverage Ratio 8. 4 15. 5 7. 8 9. 8

Our Guarantee in Economy u Proportion of guarantee outstanding Year 2006 2010 GDP 3. 5% 4. 8% 3. 5% Total Loan for SMEs u 1997 18. 5% 15. 0% 10. 8% Guarantee Proportion to SME Loans

Guarantee Outstanding by Amount By Number of Customers By Proportion by Amount ($billion) $ thousand

Risk Management Default and Payment under Guarantee

Chapter 2 Credit Guarantee Procedure

General Guarantee Procedure 1 st Step Consultation 2 nd Step Application Eligibility • Document • Eligibility Ceiling Document Review • Ceiling, etc • Bank to loan Preinvestigation 3 rd Step 4 th Step 5 th Step Credit Investigation Credit Evaluation Issue Guarantee Certificate • Site Visit CCRS • Checklist SBSS • Rating SESS • Contract • Fee

Consultation Company KODIT Financial manager CEO, Owner, etc. • Visit KODIT branch office • Bring basic document (F/S, B/C Team manager Branch officer • Inquire basic financial data and through intranet [basic eligibili Company KODIT Consultation • About company in general and C • Financial status and prospect o KODIT Initial Decision-making • Type of guarantee and rough am • Document preparation & visiting

Eligibility for Credit Guarantee Enterprises Almost all business entities are eligible for credit guarantees Ineligible Company - Not in operation - Overdue in payments of bank loans - Submitting false document, etc Ineligible Industry : - Financial services, gambling, certain luxurious restaurants, etc.

Document Required Document Financial Transaction Records Financial Statement Tax Payment Records Where to Issue What to Check • Banks &Financial institution • Bank Transaction status • Overdue loans or interest • CPA or Tax Accountant • Capital structure, profitability • Tax agency • Overdue tax, tax payment records • Officially reported sales Residential Record Certificate • City Hall, Branch offices (On-line) • Frequent change in address • Family lives together

Document Required Document Where to Issue Corporation Registration • Tax agency Certificate • Registration office Real Estate Registration Record Company Report • Registration office • Company prepares What to Check • Actual and lawful right to run the business • Management organized • Foreclosure records • Value as collateral • Detailed information about business

Application and Pre-investigation • Application Process -Check missing document -Check basic eligibility -Check debtor Application Accepted • Document Review and Pre-investigation Preview documents customer submitted Preinvestigation Preview internal information and previous report Collect external data and reputation, etc

On-site Investigation Criteria What and How to Check Interview • Devotion for the business, personality, CEO or Owner • Experience, know-how and capability Budget and finance management • Bank account, cashbook, transaction record Operation and Prospect of Business • Management of A/R, A/P • Document for sales, order, tax payment, suppliers and buyers, etc. • Factory, facilities, product, employee, etc. • Fraudulent sales and registration document Other Checkup • Fraudulent factory or office • Hidden owner with delinquent or bad credit

Framework of Investigation Report Constituent Category Overview, Management Outline, history, subsidiary CEO, Management, Shareholders Main office, Production, Operation Factory, facilities, Product and quality Suppliers and buyers Order, Sales trend Monetary Transaction List of Debt, Collateral Overdue history and list, default history Financial Statement Opinion, Rating Balance Sheet, Income Statement, Schedules of cost of goods manufactured, Financial ratio analysis, etc. Rating result Opinion of investigators

Guarantee Amount Determination u How much we guarantee? Company Request Amount needed u Sales x 25% ~ Sales x 50% Equity Shareholder’s equity x 3 Ceiling (For each company) Up to US $3 million Up to US $7 million including special guarantee programs

Credit Evaluation What and How to Check Criteria Limit Check Terms of Loans Credit Checklist Evaluation opinion • Ceiling • Limit by Rating, Sales, Equity • What kind of terms bank want? • Common Checklist (Violation or not) • Rating, Cash-flow, Firm Value • Propriety of loan and guarantee • Analyze firm and default probability etc.

Approval u Common Approval Process Assistant Team Manager On-site investigation Evaluation Report (Rating) Regulation and Error check-up Branch Manager Shareholder’s equity x 3 Final decision-making Approve or Reject u Special Level of Decision-making - Low rating score - Amount higher than branch limit - Without guarantor required Headquarter Approval

Contract & Issuance u Concluding guarantee contract CEO Guarantor KODIT Contract Company Management Guarantor u Guarantee Certificate Guarantee Contract Paying of guarantee fee Guarantee Certificate Loan

Fee and Coverage Ratio u Guarantee Fee Ratio Add Rating 0. 7% ~ 2. 5% Basis rate u Subtract 0. 1%~0. 4% 0. 1%~0. 3% Long-term user Excessive user Innovative Co Low risk gu’tee Coverage Ratio u u Share risk with banks, but too complex Standard coverage ratio è 50% ~ 90% (at their rating) è Average coverage ratio : 83% (2007) Determination 0. 5% ~ 3. 0% Bottom : 0. 5% Ceiling : 3. 0%

Thank you !! Korea Credit Guarantee Fund International Affairs Team Tel : (82) 2 710 4321