It has been revealed that the Korea Housing and Urban Guarantee Corporation (HUG) has a combined exposure—comprising guarantees and loans—totaling 8.6733 trillion won to 300 companies classified as “Caution” or “Alert” due to increased credit risk.
According to an analysis of data received from HUG on October 1 by Rep. Heo Young of the Democratic Party of Korea, a member of the National Assembly’s Land, Infrastructure, and Transport Committee, the exposure for 207 companies under “Caution” status in the ongoing monitoring program totaled 5.8105 trillion won as of the end of June this year, while the 93 companies classified as “alert” had an exposure of 2.8628 trillion won. Although HUG discloses the number of companies in each category and the distribution of credit ratings, it does not disclose the outstanding balances of guarantees and loans for these companies.
HUG’s ongoing customer monitoring is an early warning system that tracks changes in a company’s creditworthiness by analyzing guarantee and business location information along with financial data. Companies are categorized into four tiers: “Normal,” “Under Observation,” “Caution,” and “Alert.” “Caution” refers to companies whose debt repayment capacity is likely to deteriorate, while “Alert” refers to companies whose repayment capacity has significantly deteriorated, posing a substantial risk to debt recovery.
Among the “Caution” and “Alert” companies, 88 out of 122 (72.1%) with valid credit ratings were rated CCC+ or lower, indicating a high risk of default. Their exposure totaled 3.704 trillion won, accounting for 42.7% of the total. In particular, 3.5215 trillion won was concentrated in just 49 companies rated CCC-. The exposure to the 178 companies without credit ratings also totaled 2.0687 trillion won.
The risk is concentrated in a small number of companies. A single company with the largest exposure accounted for 1.1628 trillion won, while the top three companies accounted for 2.8218 trillion won (32.5%), and the top 10 companies accounted for 4.8445 trillion won (55.9%).
Guarantees for companies at the “warning” level were concentrated on products directly linked to housing project financing and the fulfillment of pre-sale commitments. The outstanding balance of housing pre-sale guarantees was 1.3598 trillion won, and project finance (PF) guarantees totaled 775.8 billion won; combined, these amounted to 2.1356 trillion won. This represents 74.6% of the outstanding guarantee balance for companies under the “Warning” level. Looking at all companies under the “Caution” and “Warning” levels, the largest exposure by product category was rental deposit guarantees after occupancy inspection, at 2.8275 trillion won, followed by housing presale guarantees at 2.4974 trillion won, project finance (PF) guarantees at 1.5475 trillion won, and mortgage guarantees at 698.4 billion won.
The number of cases where credit ratings have declined during the guarantee period is also on the rise. The number of cases increased from 216 in 2021 to 311 in 2022, 311 in 2022, 323 in 2023, 396 in 2024, and 383 in 2025; 199 cases occurred in the first half of this year as well, bringing the total to 1,828. Of these, 358 cases (19.6%) involved a downgrade from BBB-—the lowest investment-grade rating—to a lower rating; 725 cases (39.7%) involved a downgrade to CCC+ or lower; and 218 cases (11.9%) involved a downgrade to the lowest rating, D.
To expand housing supply, the government plans to increase HUG’s housing construction guarantees from 86 trillion won to 100 trillion won annually and broaden the scope of project finance (PF) loan guarantees. However, a regular audit by the Board of Audit and Inspection in July of this year revealed that HUG had approved 382 billion won in guarantees for three PF projects that should have been rejected, and had undercharged guarantee fees due to the incorrect application of screening grades and credit ratings.
Rep. Heo Young stated, “Financial authorities are disclosing not only the number of companies showing signs of distress but also the scale of credit extended to those companies by the financial sector, thereby explaining the impact on the soundness of financial institutions,” and “HUG should not only disclose the number of companies at each monitoring stage but also disclose the scale of exposure, so that it can transparently disclose where and to what extent the risks of public guarantees are concentrated.”
