Used for Land Payment... Securing Main PF Next Year to Start Construction
Hanwha Co., Ltd. Successfully Raises Syndicate through Credit Guarantee
Hanwha Group has raised 740 billion KRW in project financing (PF) funds to pay for the land price of the Seoul Station North Station Area Development Project. Hanwha Group plans to invest a total of 1.6 trillion KRW in the idle land north of Seoul Station to build a complex called the ‘Gangbuk COEX,’ which combines MICE (Meetings, Incentives, Conferences, and Exhibitions) facilities, offices, and hotels.
According to the investment banking (IB) industry, Seoul Station North Station Area Development Co., Ltd. raised a total of 740 billion KRW in PF funds with KB Securities and others as lead managers. The lead managers successfully gathered a lending syndicate by dividing the PF loan into senior tranche of 380 billion KRW and mezzanine tranche of 360 billion KRW based on collateral rights and repayment priority. It is known that securities companies, capital companies, and other financial institutions participated as major investors.
Hanwha Corporation, the holding company and shareholder of Hanwha Group, provided credit support such as capital supplementation and debt assumption agreements for the PF loan. This means that if Seoul Station North Station Area Development fails to properly repay the principal and interest of the PF loan, Hanwha Corporation will be responsible for repaying the PF debt on behalf of the developer.
An IB industry official said, "The development project near Seoul Station, a central location in Seoul, has an excellent site, so the project is expected to be successful," adding, "Hanwha’s provision of credit support allowed the syndicate to be formed smoothly despite the difficult financial market conditions."
Seoul Station North Station Area Development is a development purpose company established by Hanwha Group affiliates. It was established with investments from Hanwha Impact Co., Ltd. (40%), Hanwha Connect Co., Ltd. (29%), Hanwha Corporation (29%), and Hanwha Hotels & Resorts (2%). Initially, Hanwha Estate also held a 1% stake but transferred it to Hanwha Hotels & Resorts.
Hanwha Group plans to pay the land price for approximately 29,000 square meters (about 8,787 pyeong) located at 122 Bongnae-dong 2-ga, Jung-gu, Seoul, to Korea Railroad Corporation (KORAIL). The original land purchase price was around 530 billion KRW, but it is reported that the amount slightly increased due to area adjustments.
Hanwha Group will complete the land ownership transfer in early November and raise more than 1 trillion KRW in main PF funds next year to start construction. The so-called ‘Gangbuk COEX Complex,’ which includes a large-scale MICE facility with an international conference hall, offices, officetels, and hotels, will be developed. The complex, consisting of five buildings ranging from six basement floors to a maximum of 38 floors above ground, will be connected to Seoul Station and sold to the private sector. Hanwha Engineering & Construction will participate as the contractor.
Seoul City and KORAIL selected the Hanwha consortium as the preferred negotiator in 2019 and are currently proceeding with this project. Seoul City plans to use about 310 billion KRW in public contribution funds received from Hanwha Group for public projects such as railroad undergrounding and pedestrian paths connecting Cheongpa-ro. Hanwha Group previously took out a loan of about 220 billion KRW from Meritz Securities and others to pay the public contribution funds.
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