Samil PwC Steps Up as Savior for Bridge Loan Exit

Entered into a Business Agreement with Centopia and K-Clavis
Proposing Exit Strategies for 'Bridge Loans' Emerging as Real Estate Time Bombs
Debt Recovery through Business Model Transformation and NPL Fund Establishment

[Asia Economy Reporter Lee Seon-ae] To resolve the issue of bridge loans in real estate development projects, which have emerged as the biggest trigger for the chain insolvency in the secondary financial sector, Samil PwC has started a focused support service for bridge loan exits targeting financial institutions and developers.

On the 27th, Samil PwC announced on the 30th that it signed a business agreement with Centopia and K-Clavis Asset Management and launched a bridge loan exit service team composed of real estate finance experts.

Having launched the industry's first Business Turnaround Service (BTS) Center in January last year, Samil PwC plans to actively propose ways to recover claims through business model transformation and setting up non-performing loan (NPL) funds for projects where conversion to main project financing (PF) is delayed (normal bridge loans) and projects where insolvency has already materialized (distressed bridge loans), amid worsening liquidity due to rapid interest rate hikes and incidents such as the 'Legoland' case.

For normal bridge loans, Samil PwC revealed that it is reviewing a conversion method to rental apartments (cooperative type) that allows smooth bridge loan exits by converting to main PF through pre-sale rather than general sale, targeting projects with favorable locations based on an analysis of the target sites. To this end, Samil PwC is working with Centopia, which has a track record of numerous real estate development projects including the cooperative-type private rental housing in Midan City, Yeongjongdo.

Additionally, for distressed bridge loans, Samil PwC signed an agreement with K-Clavis Asset Management, which was preparing to establish project or blind funds, and is reviewing a value-add strategy that involves purchasing bridge loans through funds, selecting bonds with development value higher than liquidation value, and transferring the real estate to a separate SPC for development.

The bridge loan exit service is a total real estate finance consulting service that provides one-stop solutions from detailed analysis and diagnosis of real estate development project bridge loans to strategy formulation and execution. This can be seen as a proactive and agile move by Samil Accounting Corporation to swiftly respond to customers amid the downturn in the real estate market.

Leading this service as a structured finance expert with years of experience in securities investment banking (IB), Samil PwC Partner Lee Sang-woong said, “We are currently discussing with the companies with whom we recently signed agreements to find the optimal solution through the bridge loan exit service,” adding, “Since the end of last year, we have been meeting with creditors such as savings banks, capital companies, local agricultural cooperatives, and securities firms, most of whom have shown considerable interest.”

A bridge loan is a short-term loan mainly raised to pay for land acquisition costs, and repayment is possible only when it is connected to the main PF. However, due to the real estate market downturn caused by rising raw material prices followed by rapid interest rate hikes, cases of conversion from bridge loans to main PF have recently been nonexistent. Although developers are extending bridge loans by bearing additional interest, the IB industry expects that if the real estate market does not rebound after the first quarter of this year, most bridge loans are likely to become distressed considering the high interest rates associated with bridge loan borrowing.