[Funding] Booyoung Affiliate Muju Deogyusan Resort Secures 190 Billion Won to Withstand COVID-19

Mujoo Deogyusan Resort Family Hotel

[Asia Economy Reporter Lim Jeong-su] Muju Deogyusan Resort, a resort operating company affiliated with Booyoung Group, has raised 190 billion KRW in funds to withstand the COVID-19 situation. The funds are intended to repay approximately 140 billion KRW in matured borrowings and to be used for operating expenses. As the company has been running deficits for a long time and the recent losses have increased, external financing has become inevitable.

According to the investment banking (IB) industry on the 26th, Muju Deogyusan Resort received a credit line loan of 150 billion KRW under the lead of Hana Bank. The loan can be increased up to 190 billion KRW as needed. The maturity is two years.

Muju Deogyusan Resort is reported to have provided resort land and other assets as collateral during the loan process. Currently, Muju Deogyusan Resort operates a ski resort, an 18-hole members-only golf course, and lodging facilities (1,610 rooms) on a total site of 7,019,560㎡ (approximately 2,127,100 pyeong) in Simgok-ri, Seolcheon-myeon, Muju-gun, Jeollabuk-do, including national land.

The raised funds will mainly be used to repay borrowings. Most of Muju Deogyusan Resort’s borrowings matured this month. These borrowings amount to approximately 140 billion KRW, borrowed from Double M Resort, MD Resort, Ballasstone Jeilcha, and others. It is understood that most of these borrowings were repaid using the funds raised from Hana Bank.

Muju Deogyusan Resort is currently not in a position to reduce its debt burden with its earnings. It has been running deficits for eight consecutive years since 2014, and its performance worsened further due to COVID-19. Operating losses, which were below 7.3 billion KRW until 2018, exceeded 10 billion KRW in 2019 and increased to 18.8 billion KRW last year.

The accumulated net loss over the past three years has reached 40.4 billion KRW. As net losses continue, the scale of equity capital is also threatened at the 100 billion KRW level. If a net loss of over 20 billion KRW is recorded this year, the company will enter a capital erosion zone. An IB industry official pointed out, "If Booyoung Group does not inject new cash and COVID-19 prolongs, the capital erosion is likely to deepen."

Meanwhile, Booyoung Housing, a 100% subsidiary of Booyoung, is the largest shareholder holding 74.95% of Muju Deogyusan Resort’s shares. Muju Deogyusan Resort holds 24.40% of its own shares.