[Funding] Busan Sanseong Tunnel Refinances 230 Billion Won to Reduce Financial Burden

[Asia Economy Reporter Lim Jeong-su] Busan Sanseong Tunnel Co., Ltd., the executor and operator of the Busan Sanseong Tunnel, refinanced 230 billion KRW of borrowed funds for a private investment infrastructure project. This was done to reduce financial burdens by replacing existing high-interest loans with low-interest loans.

According to the investment banking (IB) industry on the 16th, Busan Sanseong Tunnel borrowed 230 billion KRW from a lending consortium. The loan maturity is March 2043, with a loan period of approximately 21 years and 3 months. Early repayment before maturity is possible. KB Securities acquired the senior loan held by Samsung Securities through a special purpose company (SPC) and then sold it to the market as securitized bonds guaranteed by the Korea Credit Guarantee Fund.

Busan Sanseong Tunnel is the executor of the Sanseong Tunnel private investment project. The financial investor, Issuer Infrastructure Investment Company, holds the largest stake at 65%. Nine construction companies, including POSCO Engineering & Construction (11.1%), Lotte Engineering & Construction (8.8%), Gyeongnam Development (2.8%), and IS Dongseo (1.1%), participate as construction investors, and Kumho Development Corporation (5.0%) also holds some shares as an operator.

Sanseong Tunnel is a tunnel with a total length of 5.62 km connecting Hwamyung-dong in Buk-gu, Busan, and Jangjeon-dong in Geumjeong-gu, completed in September 2018. The executor, Busan Sanseong Tunnel, transferred ownership to Busan Metropolitan City and was granted a 30-year management and operation right. This is a BTO (Build-Transfer-Operate) project, where ownership is transferred to the public after infrastructure construction is completed, and only management and operation rights are retained.

The procured funds will be used to repay existing loans. During the issuance of refinancing bonds, Busan Sanseong Tunnel lowered the interest rates of existing senior and subordinated loans by more than 1%. An IB industry official said, "Busan Sanseong Tunnel's toll revenue is about 70% of the level agreed upon in the implementation agreement, resulting in poor profitability," adding, "It is understood that they pursued the issuance of refinancing bonds by utilizing the low-interest-rate environment to reduce interest expenses and improve profitability."