[Asia Economy Reporter Lim Jeong-su] KT is raising 700 billion KRW in project financing (PF) funds to develop the Gangbuk Headquarters site around Guui Station in Seoul. KT plans to proceed with a large-scale development project to build apartments, offices, hotels, and more by contributing the project land as an in-kind investment and NongHyup Bank contributing some equity.
According to the investment banking (IB) industry on the 18th, KT’s affiliate 'NextConnectPFV (hereafter NCP)' is recruiting PF investors for 700 billion KRW with NH Investment & Securities and IBK Investment & Securities as lead managers. NCP is a project company established by KT to develop its office site. KT contributed land valued at 368.5 billion KRW as an in-kind investment, and NongHyup Bank contributed 19.4 billion KRW in cash. KT and NongHyup Bank’s equity stakes are 95% and 5%, respectively.
The PF loans will be executed in three tiers according to repayment and collateral priority: senior tranche (Tranche A) 300 billion KRW, mezzanine tranche (Tranche B) 200 billion KRW, and junior tranche (Tranche C) 200 billion KRW. NongHyup Bank and IBK Industrial Bank are expected to participate in the senior and mezzanine loans. For the junior tranche of 200 billion KRW, lead managers NH Investment & Securities and IBK Investment & Securities are recruiting investors, and if investor recruitment is insufficient, they will share the remaining balance.
NCP provided collateral trust beneficiary certificates for the land it holds and pre-sale proceeds as collateral. Mugunghwa Trust participated as the trust company in the PF transaction. The loan-to-value ratio (LTV) of the entire loan, including the junior tranche, against the collateral assets is 41.6%.
NCP will use the raised funds to promote the largest advanced business complex development project in Gwangjin-gu. On a total site of 78,147㎡ (approximately 23,640 pyeong), the plan is to construct the Gwangjin-gu new government office, 1,363 residential units, office buildings, hotels, retail, cultural, and assembly facilities as a large-scale complex. The residential units will be supplied as 631 general sale (post-sale) units, 432 private rental units, and 300 SH Happy Housing units. Lotte Construction is in charge of construction.
An IB industry official said, "The area around Guui Station in Gwangjin-gu is a key area in the northeastern riverside development project along the Han River, where land prices and real estate values have been rising recently due to redevelopment projects. The project has good profitability, and the PF loan’s LTV is less than 50%, so the repayment stability is quite high, so there should be no problem recruiting investors."
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