PPP Project

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					    PPP Project Finance

                Korea Development Institute
Public & Private Infrastructure Investment Management Center
     Head of Finance and International Cooperation Unit
                      Kyong-ae Park

1. Basic Structure of PPP Project

2. PPP Project Finance

3. Refinancing
1. Basic Structure of PPP Project

     Public Procurement VS PPP Project

 PPP Project is a type of public procurement including the design,
  construction, financing, and operation of infrastructure facilities

 PPP has replaced the traditional public procurement

         Public Procurement Project                    PPP Project

 •   Financing through general account   •   Financed by Private Sector
     budget                              •   Government assistance through
                                             construction subsidy and minimum
 •   Financing through tax (special          revenue guarantee
     account)                            •   Recovery of capital expenditure
                                             through user fees (BTO)
 •   Financing through the issue of      •   Recovery of capital expenditure
     government bonds                        through facility lease fee (BTL)
 PPP Project의 Project
 Location of PPP 의의

 PPP project supplements government finance by constructing and
  operating social infrastructure facilities, which are constructed and
  operated on government budget
 PPP uses the creativity and efficiency of the private sector

  Traditional                  3rd Sector
  Governmen     Outsourcin
                                                  PPP     Privatization
       t            g

                    Spectrum of Private Participation

  Reason for Introducing PPP Project
 PPP Project의 장ㆍ단점

 Supplementation of Finance
       Possible to push forward with a variety of infrastructure facilities in the early
        stages with limited finance

 Uplift Efficiency
       Integrates design, construction, financing, and operation to minimize Life Cycle
        Costs (LCC)
           Disadvantages are that the borrowing cost of the private sector is relatively high
            compared with that of the public sector
           PPP project can be carried out only when it reduces costs compared with government
            projects(PSC, Public Sector Comparator) even after considering the cost increasing
            factors of the PPP project (Value for Money)

 Enhance Level of Service
       Expects enhanced level of service by specifying performance levels required in
        the operation phase in advance
       Possible to diversify services through the creative use of the facility
  Structure of BTO Project
  PPP Project 추진 방식

 BTO (Build-Transfer-Operate) PPP Project


         B               Provide                               Management /
                         Service              Donate           Operation Rights
         T                         Fee
         O                                    Acceptance)

                                                             Central / Local
                         User                                Government

       SPC(Special Purpose Company) constructs and transfers facilities to the country
        and obtains management and operation rights in return
       Operates a business by collecting fees based on the management and operation
        rights for a fixed period of time to recover investment
Structure of BTO Project
PPP Project의 장ㆍ단점

         BTO (Build-Transfer-Operate)

                                                          BTO Project
         ① Loan, Investment       ②Donation Default
                                                            Mainly applied to road, railroad,
Financial                                                     and port projects where the
                        SPC               Government          investment can be recovered
                                                              through the fees that are charged
        ⑤Repayment,               ③Management and             to the users
         Recovery                  Operation Rights

              ④Fees            ④Service                     As the investment is recovered
                                                              through the user fee, SPC directly
                                                              shoulders the demand risk
                        User                                  (fluctuation in user fee revenue)

 PPP Project Return on Investment (ROI)

 Rate of Return On Investment
      Sponsor: Weighted average capital cost (WACC) as the return on investment for
       the entire investment capital (equity and debt)
      Government: Return on total private investment recognized in terms of capital cost
        Concept used in determining user fee

 Competent authorities can determine the level of return on
 investments by considering as follows;
      Average loan interest rates of domestic and foreign financial institutions on
       infrastructure facilities
      The level of the return on investment of similar PPP projects
      Project type
      The risk sharing amount of the government during negotiations

  Financial Resources of PPP Project

 The investment ratio for state controlled projects for which the
  concession agreement is signed as of the end of December 2007 is
  20.7% equity, 52.7% debt, and 26.6% government subsidy

 The central or local government can issue subsidies or provide long-
  term loans to the sponsor to carry out revertible facilities projects

 Mostly construction companies participate as the equity holder in
  PPP project in order to award construction contract
       After construction they sell shares to long-term investors such as life insurance
        companies, pensions and funds

 Mostly industrial banks, commercial banks, life insurance companies,
  and pensions and funds participate in debt financing through
  syndicated loans
 Financial Resources of PPP Project: Equity

 The investor ratio is composed of 54.6% construction company,
  10.2% bank and insurance company, and 6.0% infrastructure fund
 According to the PPP Basic Plans, equity ratio of total private
  investment could be decrease to 15% when the financial investor
  covers more than 50% of the equity
       The share of construction companies in PPP project is decreasing after the debt-
        to-equity ratio regulation is relaxed
       The investment of financial institutions through infrastructure fund and so forth

 Financial investors are passive in participating as the equity investor
  due to the characteristic of the organization
       As financial institutions are regulated to minimize investment loss, they have risk
        averse attitude
       Financial institutions can hardly play the leading role for the development and
        investment of PPP projects
 Financial Resources of PPP Project: Equity

 Financial institutions are participating in the share investment of
  PPP projects in the form of infrastructure fund in order to avoid
  regulations on investment restriction

       Financial institutions are influenced by the 15% share investment restriction

       The investment trust type fund without share rate restriction is preferred

       Carry out with private equity funds, which are easy to recruit investors compared
        with public offering funds

       Private equity funds have advantages such as prompt decision-making process

 Financial Resources of PPP Project: Equity

 Return On Equity (ROE, Dividend Rate)
      Equity investors retrieve investments through dividend

      Return on equity produced from cash flow in the position of shareholders
          input: payment of capital

          retrieval: recovery of dividends

      ROE is the concept used in the position of investors when making decisions for
       the execution of the project

 Financial Resources of PPP Project: Loans

 The borrowed capital takes up to 70% or higher of the total private
  investment cost
       The borrowed capital is mostly procured through loans from domestic financial
       Recently, other financing methods using bonds such as SOC bond and ABS bond
        are sought, but the result is insignificant in terms of the number of bonds issued
       Subordinated debt is also used and in particular, the cases where it is procured
        through refinancing of completed projects are increasing

 Difficult to conclude financial contract for PPP projects since the
  financial crisis
       Recent projects have low rates or returns(the rate of return of road projects is
        around 5∼6% (actual))
       Minimum revenue guarantee is not applied

 Financial Resources of PPP Project: Loans

 The common characteristic of recent financial contracts
        Financial investors set a certain rate of return (ROI) for their capital gain
        Construction investors should supplement the fund if this ROI is not achieved
        Construction investors accept the requirements of financial investors

       In most financial contracts, financial investors avoid demand risk
        Establishing the financial structure where the project developer, the construction
         investors, shoulder the demand risk
        Financial investors make construction investors hold more stakes to minimize
         their investment risks

      PPP Project Financing

                BTO Project

                 Loan 80-85%
             (Prior, Subordinated)                            In BTO scheme, the investment
                                                               share should be at least 15% of the
                Equity 15-20%                                  total private investment cost

                                                              ROI: 6-8% or less,

                                                              ROE: 10% or higher
                          Prior Loan
[BTO Project]                                                      Subordinated Loan Recovery
                                       Prior Loan Recovery                      Dividend Recovery
and Loan                                                                       (If certain conditions are met)

                     Period                                        Operation Period

                                0               5             10              15             20          25      30   Time(Year)

Cash Flow of PPP Project

                                            Construction                                           Operation
                                              Period                                                Period
Cash Inflow

                                                                             Operating Income (Cash Flow)
                            Equity                    Loans

                         Construc                              Completed
                                                                                                   Completion of loan
                         Comme                                                                         recovery
                         ncement               Construction                                                                  Dividend
               Investment by Construction

                                                                                                   Loan Recovery
                                                                                                (Principle + Interest)

                                                Private                      Payment of
                                              Investment                      Interest
Cash Outflow


                                                                                            Interest During Operation

                                                                             Term of Loan         Loan Repayment           Investment
                                                                                                       Period            Recovery Period

2. PPP Project Finance

   Financial Advisory Service and Arrangement

   Financial Advisory Service

                    Submission of              Support for
Collection of       Financial                  Proposal                  Concession              Select
Information for     Advise
                                               Preparatio Support for    Agreement Establishment Arranger
Financing           Proposal and               n and       Negotiation              of Financing and Lead
                                   Contract                                         Strategy     Manager
                    Consultation               Evaluation
                    for Conditions                                                               Bank

  Financial Arrangement

Send              Prepare and     Receive      Carry Out   Prepare
Request for       Send Terms                                          Organization Prepare   Financial
                                  Mandate      Due         Business of Syndication Financial Agreement
Borrower’s        for Financial   Letter       Diligence   Prospectus
Financial         Arrangement                                                      Agreement

 Financial Arrangement Procedure

1) Send Request for Proposal
      The borrower sends a request for proposal to the financial institution
      The borrower gives priority to the financial arrangement capacity or the
       syndication arrangement capacity of the corresponding financial institution when
       sending the request for proposal
      The borrower provides overall data summarizing the contents of the project

2) Prepare and Send Terms for Financial Arrangement to Borrower
      Potential financial arrangers who received the request for proposal prepare the
       terms for financial arrangement
      Compose financial conditions that have competitive strength while
       accommodating basic requirements such as the amount and expiration
      Prepare terms & conditions and submit official letter of intent to the borrower
      Carry out bid for selecting financial arranger with a number of financial institutions

  Financial Arrangement Procedure

3) Reception of Mandate Letter
      The borrower shall compare the terms and conditions received from potential
       financial arrangers and choose the one with best conditions
      Issue mandate letter requesting for financial arrangement to the selected
       organization (single or multiple)
      The most important criteria in the selection process is the pricing and claim
       preservation (security) structure

4) Execution of Due Diligence by Financial Arranger
      Financial analyzer conducts due diligence for syndication
      For the fairness of assessment, conduct reevaluation by an independent third party
      The cost of due diligence is shouldered by the borrower, and the service contract is
       concluded among the service company, financial institution, and borrower
      Due diligence by the financial institution on the contents of project suggested by the
       borrower in the request for proposal
      Execute item by item on traffic volume (transportation), technology, law, accounting,
       insurance, and operation sections
  Financial Arrangement Procedure

5) Prepare Information Memorandum
      Prepared by the financial arranger to help the approval decision of the lending
       party or the investing institution
      The participating financial institution shall conduct an independent evaluation and
       analysis by referring to IM
      Major Contents: Overview of project, project structure and status of major
       participants, required funds, financial conditions, traffic volume analysis,
       construction plan, operation plan, insurance purchase plan, principal and interest
       repayment capacity review (return on investment analysis for investment in
       shares), termination payment review, project risk analysis, etc.

6) Formation of Syndication
      Financial arranger prepares the syndication schedule and forms a syndication
       team to carry out the procedure
      Carry out in public offering fund (Open Market Syndication or General Syndication)
       and private equity fund (Private Placement or Club Deal)
  Financial Arrangement Procedure

7) Preparation and Conclusion of Financial Agreement
      The financial arranger requests the lawyers of the lending party to prepare the
       draft for the major financial terms agreed with the borrower
      Prepare the revision to be sent to the borrower through the review of the lending
       party based on the draft
      The financial arranger carries out the negotiation procedure for the contents of the
       financial agreement with the borrower based on the revision
      The financial arranger and the borrower confirms the financial agreement finally
       through the consultation of their lawyers
      Conclude financial agreement with the borrower

 Financial Arrangement Procedure

8) Contents of Claim Preservation
      Acquisition of infrastructure credit guarantee
      Termination payment
      Establish prior collateral security for management and operation rights
      Establish prior right of pledge for shares owned by investor
      Management for all deposit accounts of the borrower
      Establish prior right of pledge for the right for insurance proceeds
      Security by means of transfer for overall contract rights of the borrower
       (concession agreement, construction subcontract, management and operation
       contract, etc.)
      Save prior loan principal and interest for [ ] months after the beginning of the
       operation to the debt service reserve account (DSRA) and other credit intensifying

 Investment Terms of Financial Institution

                       • Type of Shares: Common Shares, Face Value: 5,000 Won
                       • Acquisition Cost: 5,000 Won
                       • Chargeability for cost overrun in case it occurs
Terms of Investment
                       • Time and Condition for Capital Input: Pro-rata, investment order among
                         prior loan, government subsidy, equity, etc.
                       • Sales of Shares: Restriction for sales of shares
                       • Start prior debt repayment
                       • Cumulative DSCR per half term [ ] times or more consecutively
 Terms of Dividend     • Completion of overall savings subject to obligatory savings such as debt
Payment Restriction      service reserve account (DSRA)
                       • Completion of the payment of various fees, principal and interest
                       • Must have no balance for stand by facility
                       • Minimum revenue guarantee on concession agreement
                       • Sellable period for the investment shares on shareholder agreement
   Dividend and
                       • Investment principal could be covered by termination payment (in
Investment Principal
                         concession agreement) and by retained cash balance
Recovery Plan (Exit
                       • Subordinated loan could be invested to prevent the lowering of the rate of
                         return due to non-payment of dividends during the construction and initial
                         operation period

 Positions of Sponsor and Lender

 Position of Lender
      Requested for the procurement of debt capital by the sponsor
      Minimize loan to promote stability for loan repayment
      Maximize equity capital, request for credit enhancement device for shareholders
      Risk Averter
      Evaluate sponsor based on the loan principal repayment capacity (security, DSRA,
       DSCR, etc.)
      Expect appropriate net margin depending on the risk of the project

 Characteristics of Financial Agreement
      Contract parties are SPC and Lenders
      First priority in all monetary distribution of SPC should be the repayment of loan
      Control cash flow through the agency bank (overall capital management such as
       revenue management, cost management, etc.)
      Determine the equity investment size of the sponsor
      Restrict (investment agreement) sponsor’s overall cash flow
      Restrict facilities supplier, O&M, and raw materials supplier other than the sponsor
      Request for the sponsor’s credit enhancement tools (additional equity investment,
       subordinated loan, cash supplement, etc.)
      Agreement that covers overall risks that may occur during the loan agreement         26
  Positions of Sponsor and Lender

 Position of Sponsor(Equity Investor)
       Minimize the equity investment for maximum profit (net profit per share)
       Low interest rate debt capital as much as possible to maximize equity capital gain
       Risk taker
       Evaluate Project on its profitability (IRR rate or return, NPV, etc.)
       Expected return is the cash flow of dividend, and disposal(liquidating) value after
        the repayment of loan

 Characteristics of Equity Investment Agreement
    Includes equity investment and operation among shareholders, decision making
     structure, agreement for exit
       Plan for sharing sponsor’s credit intensifying conditions
       Accepts the overall conditions on the loan agreement
       Tends to exclude restrictive conditions in order to secure autonomy of operation

   Subordinated Debts

 Subordinated Debt
      Takes the form of debt
      The repayment claim can be exercised after the prior debt is repaid
      The interest is received according to certain predetermined conditions
          A mixed product with the characteristics of debt and capital (mezzanine finance)

 The financial institution issues subordinated debts in order to optimize the
  weighted average financing cost
      Subordinated loan appeared after financial institutions began to participate as
       equity investors
      In general Korean PPP project structure did not allow dividends or capital
       reductions unless prior loan principal is completely repaid
      Equity investors cannot earn the dividend revenue for 10 or more years after the
       operation starts
      Financial institutions use the method of combining subordinated debts and investor
       capitals for the earning until they start to get dividend income
  Subordinated Debts

 The interest rate for the subordinated loan is much higher than that
  for prior loans
      The interest rate for subordinated debts is determined to cover the weighted
       average financing cost of equity and itself
      The interest rate for the subordinated loan is determined based on the comparison
       with the interest rate for the prior loan
      The level of interest rate varies depending on:
          The equity amount of the financial investor

          The subordinated debt amount

          Negotiating power of the lender and sponsor

          The characteristics of the project such as traffic demand

3. Refinancing

Definition and purpose of refinancing

 Definition

    Acts of changing equity structure, investor stake holdings and debt
     financing conditions of the project by the project company compared to
     the time when loan agreement was concluded.

 Purpose

    Reduce financing costs by cutting interest expenses and maximize
     shareholders profit.

    Gain financial leverage effect

Reasons for Refinancing in PPP Project

 In PPP project, refinancing aims to increase expected rate of
  return of investment when financing can be done on better
  conditions than the first loan agreement for the following

      When construction risk is removed by completing construction of facilities
      When actual level of operating revenue is known
      When instability of project is removed by realization of government support.
      To enhance financial leverage effect when the initial capital structure was
       unfavorable conditions for investor
      Changes in macro economic situation

Sharing Refinancing Gain in PPP Project

 Why does the government share refinancing gain?

     As a major player, the government provides various supports to PPP project,
      and it has right to share refinancing gain unless the private partner bears
      100% of refinancing risks .

     The government’s contributions to PPP project in Korea
         Support and compensation for project site,
         Support for project-related civil complaints
         Financial support during construction period
         Guarantee of certain level of operating revenue for certain period of time
         Operation of SOC Credit Guarantee Fund
         Assurance of recovery of substantial amount of capital expenditure through
          termination payment when the project is suspended.

    Changes in Refinancing System

First period of refinancing      Period when there were no specified
       (Before 2004)             refinancing-related provisions in Act on PPP,
                                 its enforcement decree and basic plan

Second period of refinancing     Period when refinancing provisions were
      (2004~2007)                included in basic plan of PPP project
                                 (June 2004)

  Third period of refinancing   Period after the revision in 2007 of basic plan
         (After 2008)           for PPP project and detailed guideline for
                                refinancing was announced (December 2007).

 Features : First Period of Refinancing

       First period of refinancing(Before 2004)

 Share gain through re-negotiation by projects . There were no
  refinancing-related provisions specified in Act on PPP, its
  enforcement decree and basic plan

      Most projects neither had regulations for refinancing in concession agreement.

      Refinancing profit sharing project: through re-negotiation
          New Airport Highway

      No-sharing of refinancing gain : Project company owned all refinancing gain.
          First segment of Second Beltway of Gwangju, and Mt. Sujeong Tunnel

 Features: Second Period of Refinancing

       Second period of refinancing (2004~2007)

 Period when refinancing provisions were first included in basic
  plan for PPP project (June 2004).

      Estimate refinancing gain on loan agreement standpoint ⇒ estimate refinancing
       gain comparing ROI of shareholders between loan agreements

      Share refinancing gains between government and project company through
       negotiations based on estimated refinancing gain

      First applied in refinancing for construction project of highway between Cheonan
       and Nonsan

 Features : Third Period of Refinancing

       Third period of refinancing (After 2008)

 Sought refinancing gain by applying detailed guideline for
  refinancing based on basic plan for PPP project amended in 2007.
      Estimate refinancing gain on standpoint of concession agreement ⇒ estimate
       refinancing gains by comparing ROI of concession agreements.
      Share Refinancing gain through negotiation between competent government
       authority and project company after prior examination of refinancing gain by

         Expressway between Daegu and Busan, Gangnam Beltway, and multi-purpose
           terminal at new outer port of Mokpo (1-1 phase)

What is refinancing in Korean PPP system?

       Acts of maximizing expected return of investors by changing capital
        structure, investor stake holdings and loan conditions, compared to the
        first loan agreement
       The first loan agreement means financing terms of the concession

 Examples -- acts of refinancing

       Change in investor stake holdings by over 5%
       Changes in capital structure, such as reduction or increase of equity and
        subordinated debt or senior debt

What is refinancing - continued

 Examples -- acts of refinancing

    When changing capital structure, project company should maintain
     minimum equity ratio (over 25% during construction period, and over 10%
     during operation period)
        Conspicuous change in loan conditions(interest rate, repayment period, and
         terms on debt service reserve account)

         ex) Reduction in financing cost by applying low interest rates
             Early realization of shareholders ’gain by extending repayment period
             Early realization of shareholders ’gain by easing limitation on payment of

Sharing refinancing gain

   Sharing refinancing gain is applied to the increased portion of expected rate of
    return by refinancing
     Expected rate of return is estimated based on blended ROE concept

   Subjects are projects with total cost of over 50 billion won
     Even though their total costs are less than 50 billion won, such projects are excluded as
       appropriateness of refinancing is recognized by competent authority and profit-sharing is
       specified in concession agreement

   Profit-sharing of refinancing is not applied to PPP projects that receive neither
    financial support, MRG nor compensation on termination

Measurement of Refinancing Gain

   Refinancing gain is measured as the increased portion of ROE of calculated by
    the ‘comparative financial model’ versus ROE calculated by the ‘pre-refinancing

        Base financial             Pre-refinancing          Comparative financial
           model                        model                     model
     The financial model of     Reflect operating           Reflect financial market
     concession agreement .     performance                 conditions based on
     (Reflect it when           (Real operating             SPC’s refinancing plan
     changes occur in           revenue, operating           - Effect of change in
     agreement )                costs and estimated            capital structure
                                future price index)
                                                             - Effect of change in
                                                               loan conditions

             ROE 1                       ROE 2                       ROE 3

                                     Share increased portion by 5:5                    41
Measurement of Refinancing Gain

 Measurement of effect of changes in capital structure

      Effect of interest cost and corporate tax

      Effect of early dividend: Effect of early dividend derived from equity sale

      WACC effect: Financial leverage effect by financing debt with low
       financing costs instead of equity with high financial costs

Measurement of Refinancing Gain

 Measurement of effect of changes in capital structure

                 Capital structure
  Example         in concession                                     Effect of change
                                     capital structure
 Total project   100 billion won     100 billion won
Shareholder’s     25 billion won      15 billion won     Shareholders’ IRR increases by equity
   equity             (25%)               (15%)           sale of 10 billion won (Effect of early

     Debt         75 billion won      85 billion won         10 billion won of Additional debt 
                      (75%)               (85%)           interest cost increases shareholders’
                                                         IRR increases by reducing corporate tax
                                                                   (Effect of corporate tax)

As equity ratio reduces from 25% to 15%, financial leverage effect is enhanced (WACC effect)

Measurement of Refinancing Gain

 Measurement of effect of changes in loan conditions

     Effect of changes in interest rate of debt financing
         Effect of changes in interest rates of debt financing by applying financial market

          (Ex.) In case interest rate before refinancing is 12% and market interest rate of
           refinancing is 7%, shareholders’ earning is 5%

     Measure effect of extended repayment period and eased dividend condition

Using Shared Refinancing Gain

     Refinancing gain can be used for reducing user fee, reduction of MRG,
      shortening concession period, and receipt in cash.
         When deciding how to use refinancing gain, the impact on government budget and
           users’ burden should be sufficiently considered

     Competent authority can use government’s refinancing gain for reducing user
         Projects that receive fees from unspecified users, and that reduction of their user fees
           can improve social welfare.

     In case reduction of user fee is improper, reduction in the level of minimum
      revenue guarantee will be considered.

 Type I : Change in investors

 Changes of existing investors’ equity

                                                <A SPC>
            <A SPC>
                                            Equity of new investors
           Consortium A                              10%
        Shareholders’ equity
                                          Equity of existing investors

            Creditors’                            Creditors’
            group A                               group A
            Loan 75%                              Loan 75%

 Type I : Change in Investors

 Second period of refinancing: Refinancing gain is not measured
  when changing investors
 Third period of refinancing
      Type 1: Project with MRG ⇒ Refinancing gains are shared
          Change in investors ⇒ Measure refinancing gains with effect of changing loan
      Type 2: Project with no MRG ⇒ Refinancing gains are not shared

 2009 Basic Plans for PPP “4-4. Refinancing” provision
 -When equity of investors with over 5% is changed, the company will
 be subject of refinancing.
 - But, project with no MRG is excluded

 Type II : Change in Investors and Capital

 Typical type of change in investors and capital structure:
  Expressway between Cheonan and Nonsan
                                                 <A SPC>
             <A SPC>
                                                Equity of new
          Consortium A                        investors(B) 10%

            Equity 25%
                                             New Subordinated
                                               loan(B) 15%

            Creditors’                           Creditors’
            group A                              group A
            Loan 75%                              Loan 75%

  Type II : Change in Investors and Capital

 Third period of refinancing: Share profits based on detailed
  guidelines for refinancing as investors and capital structure are

       Regardless of availability of MRG ⇒ Share refinancing gain
         Refinancing gain : Share profit by measuring effects of both change in capital structure
          and that loan conditions

Type III: Change in investors, capital structure, and
         loan conditions

 Typical type of change in investors, capital structure, and
  terms and conditions for debt financing

                                                 <A SPC>
            <A SPC>
                                          Equity of investors 10%
          Consortium A
           Equity 25%
                                         New subordinated loan B

           group A
                                           Creditors’ group B
           Loan 75%
                                                Loan 65%
 Type III: Change in investors, capital structure, and
          loan conditions

 Share profits based on detailed guideline for refinancing as
  changes are made in investors, capital structure ,and loan

       Regardless of availability of MRG ⇒ Share refinancing gain
     Refinancing gain: Share profit by measuring effects of both change in capital structure and
        that in loan conditions

 Typical Features of Refinancing in Korea

 Changes in investors, capital structure, and loan conditions are
  made simultaneously

 Change in investors: Existing construction investor ⇒ replace with
  financial investor

 It is accompanied by change in capital structure through capital
  reduction and subordinated loans (in this case, subordinated loans
  are typically offered by shareholders)

 Typical Features of Refinancing in Korea

 New investors promote revised financial agreements that reduce
  interest expenses and also relaxes security to aim at early dividends
       Intensify the grating of credit for prior liens to obtain the consent of prior creditor
        for refinancing

 Refinancing is carried out after completion of construction
       According to the application of the Detailed Guidelines for Refinancing, the
        change of investor is also measured as refinancing
       Construction companies try to sell their equity to financial investors


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