CHUNCHEON, Oct. 27 (Korea Bizwire) – The Gangwon provincial government said Thursday it will fulfill its debt payment guarantee for the developer of Legoland Korea Resort by mid-December, over one month earlier than scheduled, to mitigate impact on the local financial market.
“Our financial circumstances are not sufficient, but we will prepare the funds through whatever means and repay by Dec. 15,” Gangwon Gov. Kim Jin-tae told reporters upon his arrival at Incheon International Airport from a business trip to Vietnam cut short by a day.
“I feel a bit sorry. I didn’t mean it, but since things developed this way, I feel sorry,” Kim said, flatly denying views that his initial decision to file for bankruptcy of a company linked to the construction project was politically motivated.
Kim’s remarks came hours after Chung Kwang-yeol, deputy governor of Gangwon Province, announced his government will repay a debt of 205 billion won (US$145 million) by Dec. 15 owed by the provincial government-funded Gangwon Jungdo Development Corp. (GJC) to build the Legoland theme park in Chuncheon, 85 km east of Seoul.
“The Gangwon government and the finance ministry have been closely discussing effective ways to alleviate the burden on the financial market, including creditors,” Chung said in a news conference.
“As a result, we’ve decided to repay the full amount of the debt guaranteed (for GJC), 205 billion won, by Dec. 15,” he said, adding the decision was the outcome of close consultation between Gov. Kim and Finance Minister Choo Kyung-ho.
GJC, 44 percent owned by Gangwon Province, established a special purpose company called Iwon Jeil Cha in 2020 to fund the construction of Legoland Korea Resort.
But Iwon Jeil Cha failed to repay 205 billion won in asset-backed commercial paper and was listed as bankrupt on Oct. 4, shaking up the local corporate debt market.
Gangwon Province had guaranteed the commercial paper’s payment, but said on Sept. 28 that it would file for GJC’s bankruptcy.
In an apparent change of stance, Gov. Kim announced on Oct. 21 that his government will carry out its GJC-related debt guarantee by Jan. 29, 2023, but financial market jitters have not subsided.
Chung, the deputy governor, said the financial resources needed to pay off the debt will be raised through a supplementary budget and the provincial government can afford such an amount of money.
“Gangwon Province feels responsible for the stability of the financial market and promises to communicate closely with the (central) government to faithfully cope with the situation,” he stressed.
The province’s promise to advance the repayment of the GJC debt came as the local corporate bond market has been wobbling in the wake of a default by Iwon Jeil Cha.
The debt payment failure has sent corporate bond yields soaring, making it harder for businesses to borrow money.
Meanwhile, Legoland Korea Resort, which opened on May 5 this year, said it will cease operations for three months, beginning next January, for the purpose of wintertime maintenance.
But the resort said the temporary closure is not related to the ongoing debt crisis of GJC.
The world’s 10th Legoland operated by the Britain-based Merlin Entertainments was expected to draw about 2 million visitors annually and create production-inducing effects worth 590 billion won a year.
But its operational performance has reportedly fallen short of the expectations, drawing about 700,000 visitors so far.