Withdrawal from Investment
As Macquarie Korea Infrastructure Fund (MKIF) decides to withdraw its investment in Seoul Subway Line 9, which opened its doors in July 2009, interest arises over how much profit they have made through this investment.
Private capital accounted for 663.1 billion won (US$596.8 million) of the 3.568 trillion won (US$3.205 billion) in total construction costs. The private capital was composed of 167.1 billion won (US$150.1 million) of equity investments and 496 billion won (US$445.6 million) of debt investments.
Equity shareholders for this project were Hyundai Rotem for 25.0%, MKIF for 24.5%, Shinhan Bank for 14.9%, POSCO ICT for 10.2%, and Hyundai E&C for 7.6%.
MKIF invested 41 billion won (US$36.8 million) for 24.5% equity share and 35.5 billion won (US$31.89 million) of subordinated bonds issued to Seoul Metro 9 Corp. at 15% interest rate, for a total investment of 74.5 billion won (US$68.7 million).
Even if MKIF withdraws its investments, the estimated earnings are at 70 billion won (US$62.9 million).
The consortium of MKIF and Hyundai Rotem were promised a minimum revenue guarantee (MRG), affiliated business earnings, and free ride assistance from the Seoul Metropolitan Government under the enforcement agreement.
They received a total of 14.2 billion won (US$12.76 million) in 2009, 32.3 billion won (US$29.0 million) in 2010, and 41.9 billion won (US$37.6 million) in 2011 from the Seoul Metropolitan Government as part of the MRG and free ride assistance agreements. Adding the 2012-2013 amounts not yet paid out, the municipal government estimates the total amount to be around 180 billion won (US$161.7 million).
Of the 180 billion won (US$161.7 million) guaranteed by the enforcement agreement, MKIF can claim the portion that corresponds to its 24.5% equity share, which amounts to 44 billion won (US$39.5 million).
Furthermore, MKIF is paid 5 billion won (US$4.5 million) every year as subordinated bond interest, a total of 25 billion won (US$22.5 million) beginning in 2009 when Line 9 opened.
Recouping both its equity and debt investments, MKIF sees 93% profitability in its exit after only four years.
“We cannot announce our detailed earnings from the investment. However, it is significantly lower than the estimated 70 billion won [US$62.9 million],” said MKIF personnel.
The initial investors such as MKIF and Hyundai Rotem are in price negotiations with the Heungkuk Life consortium, the new investors for Line 9. The price is estimated to be around 800 billion won (US$718.7 million). This payment will lift MKIF’s profits even further.