NH, Hantu, Hyundai Motor Securities Bet on Subordinated Loans
Construction of Complex Shopping Mall, 49-Story Hotel, Residential-Commercial Complex
Trillions-Won Main PF Deal Expected at Construction Start Next Year
A bridge loan worth 840 billion KRW for the development project on the former Jeonbang and Ilsin Textile sites, considered the largest complex development in Gwangju, has been successfully secured. NH Investment & Securities, Korea Investment & Securities, and Hyundai Motor Securities invested in the high-risk subordinated loans, enabling the full bridge loan procurement. A multi-trillion KRW-scale main project financing (PF) deal is expected to follow at the groundbreaking next year.
According to the investment banking (IB) industry on the 8th, Humans Holdings 1st Phase (PFV), a project company established to carry out the large-scale complex development, recently signed a PF loan agreement worth 840 billion KRW with a consortium of financial institutions. The loan was divided according to repayment and collateral priority into senior loans (Tranche A) of 470 billion KRW, mezzanine loans (Tranche B) of 150 billion KRW, and subordinated loans (Tranche C) of 220 billion KRW.
Several financial institutions including banks, insurance companies, and capital firms participated in the senior and mezzanine loans. Securities firms such as NH Investment & Securities, Korea Investment & Securities, and Hyundai Motor Securities executed investments in the subordinated loans. These securities firms transferred the subordinated loans to their respective special purpose companies (SPCs) and raised loan funds by issuing asset-backed securities based on the loan principal and interest.
The investors of Humans Holdings 1st Phase PFV include Shinyoung, Woomi Construction, Humans Holdings, MBN Property, and Mugunghwa Trust. They are currently promoting a mega complex development project on the former Jeonbang and Ilsin Textile factory site in Im-dong, Buk-gu, Gwangju, which remains as idle land. The funds raised this time will be used to repay existing borrowings, with the remaining amount allocated for initial project costs and contingencies.
According to the development plan, Humans Holdings 1st Phase intends to build a complex shopping mall (The Hyundai Gwangju), a 49-story high-rise hotel, and a residential-commercial complex with 4,300 households on the 296,340㎡ (89,800 pyeong) factory site. Public contribution facilities such as a historical and cultural park, elevated pedestrian walkways, and schools will also be established in the surrounding area. Foundation work is scheduled to begin around May next year, with full-scale building construction starting around June.
At the groundbreaking, a large-scale main PF loan transaction worth trillions of KRW is expected to follow. Securities firms that participated in the subordinated bridge loan are seen to have an advantageous position in the selection of the main PF lead managers. An IB industry official commented, "This project is a landmark development constructing the largest complex town in Gwangju," and added, "Despite the liquidity freeze in the PF market, the excellent project viability enabled successful fund procurement."
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