Business · Companies · 2 hrs ago
LH lost 75.8 billion won investing public housing repair funds
South Korea’s housing agency LH recorded a 75.8 billion won valuation loss on money reserved to repair public rental homes.
The funds, called special repair reserves, pay for work such as replacing lifts and pipes in ageing housing.
An outside manager borrowed 1.227 trillion won against assets entrusted by LH and invested the additional money.
This raised the total investment to 3.747 trillion won, about 48.7% above the entrusted amount.
LH had no separate borrowing limit or clear collateral-risk rules for this type of investment.
Because the money is needed for repairs, losses or difficulty selling investments could make it harder to access funds when work is required.
Repair costs are expected to rise, with LH forecasting 1.8602 trillion won in maintenance spending this year, nearly all its expected rental income.
LH recorded an estimated loss of 75.8 billion won on funds intended to repair aging public rental housing.
External managers borrowed against entrusted assets to expand investments, but LH had no separate limit for this borrowing.
At the end of last year, LH had entrusted 2.52 trillion won in special repair reserves to external managers.
The borrowing increased the total investment scale to 3.747 trillion won.
The article says the lack of borrowing limits and collateral-risk rules left the funds exposed to greater losses.
- Who
- Korea Land and Housing Corporation (LH) and the external managers it entrusted with the funds.
- What
- LH recorded an estimated valuation loss of 75.8 billion won on special repair reserves invested with leverage.
- When
- The loss was recorded at the end of last year.
- Where
- South Korea; the funds were intended to repair public rental housing.
- Why
- External managers borrowed against entrusted financial assets to expand investments, while LH had no separate borrowing limit or specific collateral-risk rules.
This story does not have two clearly opposing sides.
External managers borrowed 1.227 trillion won against entrusted assets and expanded the investment scale to 3.747 trillion won.
LH’s entrusted special repair reserves were valued at 2.4442 trillion won, 75.8 billion won below their original amount.
LH’s rental housing repair and maintenance costs are forecast at 1.8602 trillion won.
- Valuation loss
- 75.8 billion won
- Entrusted reserves
- 2.52 trillion won
- Additional borrowing
- 1.227 trillion won
- Total investment scale
- 3.747 trillion won
- Forecast repair costs this year
- 1.8602 trillion won