‘Yeongtong 2 District Reconstruction’ Secures 550 Billion PF Financing with HUG Guarantee

Rapid Progress in Reconstruction Project Due to Construction Fund Financing
GS Construction and HDC Hyundai Development Company as Contractors

[Asia Economy Reporter Lim Jeong-su] Yeongtong 2 District Reconstruction Association (Yeongtong 2 Association), the largest reconstruction project in Suwon, Gyeonggi Province, secured project financing (PF) funds worth 550 billion KRW with a guarantee from the Housing and Urban Guarantee Corporation (HUG).

According to the investment banking (IB) industry on the 22nd, Yeongtong 2 Association recently received a PF loan worth 550 billion KRW. The loan was executed in two parts: 430 billion KRW as senior tranche (Tranche A) for principal and interest repayment, and 120 billion KRW as subordinated tranche (Tranche 2).

Yeongtong 2 Association will use the raised funds as project capital for reconstruction site construction costs. After selecting a construction company, they plan to build 31 apartment buildings and ancillary facilities in Maetan-dong 897, Yeongtong-gu, Suwon City. The scheduled construction period is three years.

GS Construction and HDC Hyundai Development Company are responsible for construction and have provided a completion guarantee agreement. If the construction companies fail to complete the construction as planned within the deadline and do not obtain completion approval, they will be responsible for repaying the loan on behalf of the association.

HUG provided a guarantee for the PF loan. If the loan principal and interest are not properly repaid or if HUG’s credit rating falls below BB+, HUG will repay the outstanding loan principal and interest on behalf of the association. The guarantee period lasts until December 2026.

The lenders issued asset-backed short-term bonds (ABSTB) using part of the PF loan as underlying assets. The 3-month maturity ABSTBs are reissued over approximately four years, matching the loan maturity.

An industry insider said, "Yeongtong 2 District is the largest reconstruction site in Suwon and received management disposition approval last year," adding, "With PF financing secured through HUG’s guarantee amid a difficult market environment, the reconstruction project is expected to accelerate rapidly."