OREANDA-NEWS. Fitch Ratings has affirmed and simultaneously withdrawn the Issuer Default Ratings (IDRs) on Korea Finance Corporation (KoFC) and the ratings on KoFC's global medium-term note (GMTN) programme. Accordingly, Fitch will no longer provide ratings or analytical coverage for KoFC. A full list of rating actions is at the end of this commentary.

The withdrawal follows the merger of KoFC into Korea Development Bank (KDB; AA-/Stable) on 31 December 2014 to form a new KDB. As such, KoFC no longer exists. The merger has practically reversed the privatisation process for KDB that was started in 2009 by spinning off policy functions to form KoFC.

Fitch also has withdrawn the ratings on KoFC's GMTN programme because the new KDB does not intend to use the programme for a future issuance.

The ratings on KoFC's outstanding senior unsecured debt issues will be monitored under KDB's name because KDB has taken over all of KoFC's debt. The ratings are affirmed to be aligned with KDB's Long-Term Foreign Currency IDR. This is equalised with South Korea's sovereign rating to reflect the government's de-facto solvency guarantee and its commitment to its controlling or strategic stakes in the bank in light of the importance of the bank's policy roles in the system.

According to Article 32 of the new KDB Act passed in May 2014 and effective January 2015, the government continues to be responsible for any losses incurred by the bank that are not covered by the bank's reserves. KDB is 100% directly owned by the government. Its key policy roles include bailing-out or restructuring troubled or failed corporates, funding foreign currency for the system, financing long-term social-infrastructure projects, and extending credits to SMEs via on-lending to commercial banks.

Any change in KDB's IDR will be reflected in the debt ratings.