Investors split over plan to salvage megaproject

Investors involved in South Korea's largest urban development project are divided over whether to accept a series of measures aimed at putting the troubled project back on track, an official said Thursday. The split comes days after state-run Korea Railroad Corp. (KORAIL) offered to provide 260 billion won (US$234 million) in emergency funds to salvage the project if the 29 investors agree to revise details of the project and overhaul the management of Yongsan Development Co. and Dreamhub Project Financing Vehicle Co. Yongsan Development, the asset manager of the project financing vehicle, a special purpose company created for the project, failed pay back 5.2 billion won in interest on its asset-backed commercial paper last week. The default prompted KORAIL, the biggest shareholder of the project financing vehicle with a 25 percent interest, to announce the set of measures to try to resuscitate the 31 trillion won project Last week, Chung Chang-young, chief executive officer of the state-run railroad operator, asked 17 local builders and 12 other investors to express their opinions on the normalization plans by noon Thursday as he pledged to do whatever it takes to normalize the project. Some investors told KORAIL that they will accept the offer in return for some portions of construction of buildings in Yongsan, located in the heart of Seoul, or profit guarantees. Samsung C&T Corp. did not convey its position to KORAIL over the railroad operator's demand that the construction arm of Samsung Group abandon its right to build an 111-story skyscraper. The development project also calls for the construction of high-rise commercial buildings, apartments, luxury hotels and a shopping complex in Yongsan, transforming it into an international business hub by 2016. A Samsung C&T official said his company plans to endorse KORAIL's offer and give up the right to construct the landmark building, though it did not give a specific time frame on when it will convey its position. He asked not to be identified, citing policy. Still, other investors voiced their opposition to KORAIL's proposal. The railroad operator asked those companies that did not submit their opinions by Thursday to clarify their positions before Monday when it is set to finalize the normalization plans. Investors include Lotte Tour and KB Asset Management, an affiliate of South Korea's second-largest financial services company KB Financial Group Inc. as well as five Samsung affiliates -- Samsung SDS, Hotel Shilla, Samsung Life, Samsung Fire and Marine, and Samsung C&T. On Monday, Lotte Tour Co., a South Korean tour operator, which has a 15.1 percent stake in the project financing vehicle, filed for court receivership as part of its efforts to get back on its feet following the default of Yongsan Development. Dreamhub Project Financing Vehicle is scheduled to hold a board of directors' meeting and a general meeting of shareholders on April 2 to approve KORAIL's offer.