[Funding] Hanwha Group Invests 2 Trillion in Seoul Station MICE, 240 Billion Bridge Loan

Perspective view of Seoul Station complex development

[Asia Economy Reporter Lim Jeongsu] Hanwha Group has raised a bridge loan worth 240 billion KRW for the development project of the northern area around Seoul Station. Hanwha Group plans to invest a total of 2 trillion KRW in the complex development project of the Seoul Station MICE (Meetings, Incentives, Conventions, Exhibitions) district, known as the Gangbuk COEX.

According to the investment banking (IB) industry on the 30th, Seoul Station Northern Area Development Co., Ltd. received a loan of 240 billion KRW from a lending consortium including Meritz Securities. The loan is divided into a senior tranche of 210 billion KRW and a subordinated tranche of 30 billion KRW based on collateral and repayment priority. Although the loan maturity is just over two months, it will be automatically extended until July 2023 unless special issues such as loss of benefit of term or credit rating deterioration occur.

Seoul Station Northern Area Development, which raised the funds, is a project-specific company established by Korail and Hanwha Group to develop idle land near Seoul Station. Several Hanwha Group affiliates, including Hanwha Total Petrochemical (40%), Hanwha Station (29%), Hanwha Construction (29%), and Hanwha Hotels & Resorts (2%), jointly invested to establish the company. Initially, Hanwha Estate also held a 1% stake but transferred it to Hanwha Hotels & Resorts.

This project involves the redevelopment of idle railway land behind Seoul Station (located at 122 Bongnae-dong 2-ga, Jung-gu, Seoul) connected to Seoul Station, followed by sale to the private sector. Five buildings will be constructed and sold, featuring large-scale MICE facilities including an international conference center, office spaces, hotels, retail facilities, and assembly facilities. The tallest building will be 38 stories high.

Hanwha Construction was selected as the contractor, with construction scheduled to begin in January 2023 and completion planned for around May 2027. The construction period will last approximately 5 years and 4 months. Around the end of next year or early 2023, a large-scale main project financing (PF) of about 1.5 trillion KRW is expected to be raised to secure project funds.

During this funding process, Hanwha Construction also provided credit support such as capital replenishment agreements and conditional debt assumption. This means that if Seoul Station Northern Area Development faces liquidity shortages severe enough to hinder loan repayment, Hanwha Construction will support the shortfall or assume full responsibility for the debt if capital replenishment is not fulfilled.

The raised funds are reportedly planned to be used for public contribution payments and other purposes. Seoul City and Korail selected the Hanwha consortium as the preferred negotiator in 2019 and are currently proceeding with the project. Seoul City plans to use approximately 220 billion KRW in public contribution funds received from the developer for public projects such as railway undergrounding and pedestrian pathways connecting Cheongpa-ro.