The Korea Railroad Corporation asked for a capital increase by 1.4 trillion won to private investors for the normalization of the project for Yongsan International Business District development. News sources are saying that it asked for help to subsidiaries of the Samsung Group, including Samsung C&T, which are the only project participants considered to have room for funding.
The state-run railroad company announced on February 26 that it will submit a revision to the business agreement at the board of directors meeting of Dream Hub PFV, which is scheduled for February 28, to increase its capital to five trillion won.
According to the revision, the company increases its authorized capital from one trillion to five trillion won, turning 2.6 trillion out of the 5.3 trillion won to be received from Dream Hub regarding land sale into the capital. The KORAIL is going to ask for a 1.4 trillion won capital increase by private investors instead. “Contributors who participate in the capital increase will be provided with the development project rights while we’re going to limit our role to business and capital management,” said the corporation.
The KORAIL is planning to draft a new agreement once contributors give their consent and come forward for the capital increase. Then, it is going to mobilize some the down payment for its landmark building Triple One. The amount is estimated at 416.1 billion won.
Industry insiders are predicting that the company bears in mind Samsung C&T, which lost the lead manager position in 2010, in making the offer. At present, Samsung C&T has 6.4% shares in Dream Hub along with the construction rights for the landmark building worth 1.2 trillion won. “The request lacks practicality with the investors finding it difficult to issue convertible bonds worth 250 billion won, to say nothing of 1.4 trillion won,” said one of them, adding, “In the end, it seems that the corporation sent a distress call to Samsung Group subsidiaries such as Samsung C&T and Samsung SDS.”
Still, it cannot be said for sure whether the Samsung Group will come back to the project. It has already experienced a severe conflict with the KORAIL over its business feasibility. In addition, the public enterprise’s offer could result in its owning more than 50% shares in Dream Hub, incorporating Dream Hub into the railroad company.
“The offer at this time has to do with all of the private investors and the plan for capital increase has to be approved by the board of directors and the general stockholders meeting,” said Samsung C&T. It continued, “Then, the investors have to go through negotiations before determining whether to take part in the capital increase or not.”