"Loan Extension" Dispute... Engaged Couples Suffer Amid Hotel and Trust Company Feud

Trust Company Enforces Compulsory Execution at Hotel A in Sangmu District
Fence Installed and Notice of Business Suspension Posted
Wave of Wedding Cancellations for This Year
Engaged Couples: "It's Absurd to Claim They Are Also Victims"
Hotel: "Unreasonable Conditions Imposed for Loan Extension"
Trust Company: "Loan Maturity, Receivables Management Measures"

On the 25th, a fence approximately 2 meters high was installed around Hotel A in the Sangmu district of Seo-gu, Gwangju. Photo by Min Chanki

A hotel in downtown Gwangju, which boasts the largest number of rooms in the city and operates a wedding hall, has been forced to cancel wedding reservations for many engaged couples following a compulsory execution by a trust company. While the hotel claims that the trust company set unreasonable conditions and refused to extend its loan, the trust company argues that its actions were necessary to manage long-term receivables due to loan maturity and unpaid interest. Amid this dispute over responsibility, critics point out that the real damage suffered by engaged couples is being ignored.

According to Asia Economy's coverage on September 25, Hotel A, located in the Sangmu district of Seo-gu, Gwangju, consists of five underground floors, 25 above-ground floors, 720 rooms, and a wedding hall. In 2021, the hotel secured a project financing loan totaling 71 billion won, including 51 billion won from Trust Company B and 20 billion won from a bank, and completed construction in February last year. During this process, cash and real estate were provided as collateral.

Hotel A claims that after deducting an 8% loan fee of 3.7 billion won, interest of 3.1 billion won, and construction progress payments of 1.2 billion won, it actually received only 43 billion won. The hotel states that after completion, its operating income was used to pay outstanding labor costs and subcontractor construction fees.

As a result, the trust company filed a series of lawsuits, including a lawsuit for the delivery of the building, a provisional disposition to suspend business, a provisional disposition for compulsory delivery of the building, and foreclosure and auction proceedings, citing the hotel's failure to repay its loans. It is reported that the provisional disposition to suspend business was granted in March this year, and the trust company won the lawsuit for the delivery of the building earlier this month.

Currently, as of September 22, the trust company has installed a 2-meter-high fence around Hotel A to enforce the compulsory execution. Security personnel hired by the trust company are stationed at the hotel entrance, and a notice of provisional disposition for business suspension, listing the trust company as creditor and the hotel as debtor, is posted at the entrance. Notices announcing the suspension of business are also posted at the entrances of the convenience store and bakery located inside the hotel.

This situation has directly affected engaged couples who had reserved the wedding hall. Ms. Oh (34), who was scheduled to hold her wedding at the hall in November, received a text message from the hotel on September 22 stating that "the trust company is carrying out illegal activities." She was told she would need to visit the hotel in person to cancel her reservation. When she visited, the hotel responded, "We are trying to proceed with the scheduled weddings as much as possible, but it may be difficult to hold weddings from November onward." Forced to find another venue at the last minute, Ms. Oh could only book a late evening time slot.

Ms. Oh said, "In Gwangju, it's difficult to book a wedding at your preferred time even a year in advance. I made this reservation last year, but the hotel keeps repeating that 'they are also victims.' Venue rental fees are rising every year, and I can't postpone the wedding, so I had no other choice but to book a late evening slot. The biggest victims are the engaged couples who planned to get married at this venue."

Another engaged couple, who was scheduled to marry next month, also visited the hotel to assess the situation but canceled their reservation immediately after seeing the fences. It is understood that more than half of this year's wedding reservations have been canceled, and all reservations for next year have been canceled as well.

A hotel representative said, "The trust company demanded that room and wedding revenue be deposited into an account managed by them as a condition for extending the loan, required an additional 500 million won extension fee, and forced us to prepare a pre-litigation settlement agreement. Then, they immediately proceeded with the auction process. We have asked the trust company to at least allow us to hold this year's scheduled weddings, but they have not responded. All weddings scheduled for next year have been canceled, and since we are effectively bankrupt, it is difficult to pay penalties for canceled weddings."

In response, the trust company stated, "The project financing loan was executed according to the agreement, including fees, interest, and construction funds, and the hotel secured more than 90% of the funds for construction. However, not only the principal but also the interest has not been paid since August last year, so we had no other choice but to proceed with compulsory execution to manage the long-term receivables."

The trust company added, "A provisional disposition to suspend business was issued in March this year, and to resolve the hotel's unauthorized occupancy and prevent harm to innocent parties, we installed fences for building management. Even after the provisional disposition to suspend business was issued, we asked the hotel not to accept further reservations to prevent additional victims."