Concerns Over Gangwon Jungdo Development Corporation's Guarantee Debt Evasion Met with Gangwon Province's Rebuttal: "Aiming to Reduce Residents' Burden"

"Jungdo Development Corporation's Corporate Rehabilitation Does Not Affect Gangwon-do Guarantee Debt"

[Asia Economy Reporter La Young-cheol] Gangwon Province rebutted some concerns that its decision last month to file for the rehabilitation of Gangwon Jungdo Development Corporation (GJC) was "an attempt to avoid guarantee debt," stating that "the Jungdo Development Corporation’s opaque management and inefficient land sales have imposed a heavy financial burden on the residents, and this measure aims to minimize that burden."

On the 3rd, Gangwon Province stated, "This (rehabilitation) measure emerged from actively seeking ways to minimize the provincial budget burden of 205 billion KRW, rather than fulfilling the debt burden without any additional efforts."

It added, "Although some have raised concerns that Gangwon Province filed for rehabilitation of Jungdo Development Corporation to avoid guarantee debt, the province, as guarantor, is fully responsible for any amount that Jungdo Development Corporation fails to repay according to the contract."

Furthermore, it pointed out, "Under the 'Debtor Rehabilitation and Bankruptcy Act,' even if the rehabilitation application reduces Jungdo Development Corporation’s debt, the province’s guarantee responsibility for the 205 billion KRW is not reduced, so there is no factual or legal basis for such concerns."

In particular, regarding Jungdo Development Corporation’s agreement with the loan creditor I-One Jeilcha Co., Ltd. in August to extend the loan deadline until January next year and the payment of four months’ interest in advance, the province emphasized, "This demonstrates the province’s intention not to avoid guarantee debt and to ensure investors’ profits as planned."

Earlier, on the 28th of last month, the province decided to file for corporate rehabilitation for Jungdo Development Corporation, which carries the guarantee debt burden.

When Jungdo Development Corporation, a province-invested company, borrowed 205 billion KRW from BNK Investment & Securities to build Legoland infrastructure, the province provided a debt guarantee.

However, Jungdo Development Corporation, which has faced severe management difficulties since the early stages of the project amid criticisms of unfair contracts such as a 100-year free lease of the theme park site, will require the province to repay the debt with tax money if it fails to repay by the loan maturity in November next year.

The province expects that if the court accepts the corporate rehabilitation application, a new developer will participate in the project, minimizing the burden on residents and ensuring investors’ profits without causing actual damage to creditors.