Extension of Existing Loans Secured by Resort Land and Buildings
Over 1 Trillion Won Collateral Set During Alpensia M&A
Meritz Securities Smoothly Recovers Collateral Loans from KH Group Affiliates
KH Gangwon Development, a subsidiary of KH Group, refinanced the acquisition financing of 228 billion KRW borrowed during the acquisition of Alpensia Resort. Meritz Securities, which provided the large-scale M&A funding, declared an Event of Default (EOD) as KH Group’s listed affiliates faced delisting threats one after another, and is currently recovering the funds lent to several KH Group affiliates.
According to the investment banking (IB) industry, KH Gangwon Development recently secured a 228 billion KRW asset-backed loan with a two-year maturity, with Meritz Securities as the lead arranger. The loan was divided into a senior bullet loan of 200 billion KRW and a subordinated revolving loan of 28 billion KRW to attract investors. The collateral for the loan includes the land and buildings of Alpensia Resort in Pyeongchang, Gangwon Province. The procured funds will be used to repay the principal and interest of the secured loan borrowed by KH Gangwon Development during the acquisition of Alpensia Resort.
Meritz Securities executed secured loans totaling 235 billion KRW to KH Gangwon Development and KH E&T during KH Group’s acquisition of Alpensia Resort. During the acquisition financing process, collateral was also set on convertible bonds (CBs) issued by KH Group’s listed companies, including KH Philux (35 billion KRW), IHQ (35 billion KRW), and KH E&T (15 billion KRW). High-end apartments located in Dogok-dong, Gangnam-gu, Seoul, apartment-style factories in Nowon-gu, and various lands and buildings scattered across Gyeonggi Province owned by the group were also used as collateral. The total collateral value exceeded 1 trillion KRW at fair market value.
As the management situation worsened with five KH Group affiliates facing delisting threats, Meritz Securities declared an EOD to KH Group in April and began recovering funds. Subsequently, it recovered real estate trust beneficiary certificates from the acquisition of the Hyatt Hotel in Namsan, Seoul, and shares of KH Gangwon Development. It also exercised early redemption rights (put options) on affiliate CBs to recover approximately 10.5 billion KRW. Additionally, during the sale of some land within Alpensia Resort to Woosung Resort for 90 billion KRW, loans lent to several affiliates were also recovered.
An IB industry insider said, "There is a high possibility that Alpensia Resort will be put back on the M&A market as Meritz Securities exercises its collateral rights to recover funds," adding, "By extending the acquisition financing for two years, they are expected to find an appropriate sale timing within the loan maturity."
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