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SEOUL, March 15 (Yonhap) -- South Korea's state-run railroad operator on Friday offered 260 billion won (US$234 million) in emergency funds to salvage the country's largest urban development project should investors accept a package of measures to normalize it.
The development plan calls for the construction of a 111-story skyscraper, high-rise commercial buildings, apartments, luxury hotels and a shopping complex in Yongsan, central Seoul, transforming it into an international business hub by 2016. However, the 31 trillion won project is now teetering on the brink of collapse due to a funding dispute and a prolonged property slump.
Chung Chang-young, chief executive officer of Korea Railroad Corp. (KORAIL), the biggest shareholder of Dreamhub Project Financing Vehicle Co. with a 25 percent interest, made the offer to the 29 companies involved in the project during an emergency meeting at KORAIL's headquarters in Seoul.
Dreamhub Project Financing Vehicle Co. is a special purpose company created for the urban development project.
"KORAIL will do whatever it takes to avoid the collapse of the project and put the project back on track," Chung told local builders and other investors.
Still, Chung said the proposed financial assistance will depend on whether other investors will agree to overhaul the management of Yongsan Development and Dreamhub Project Financing Vehicle.
Chung also called local builders to abandon their rights to build landmark buildings in Yongsan, located in the heart of Seoul.
The railroad operator said it will confirm whether the 29 companies will accept the deal by April 1.
Dreamhub Project Financing Vehicle is scheduled to hold board of directors' meeting and a general meeting of shareholders on April 2.
The project will go ahead again if KORAIL's offer is approved on April 2, said KORAIL spokesman Jang Jin-bok, but warned that the project will collapse if the 29 companies sprun the offer.
Jang made the comment after the close-door meeting.
Officials of the 29 investors, including Lotte Tour and KB Asset Management, an affiliate of South Korea's second-largest financial services company KB Financial Group Inc., were not immediately available for comment.
KORAIL's offer comes two days after Yongsan Development Co., the asset manager of Dreamhub Project Financing Vehicle Co., failed to pay back 5.2 billion won in debts.
The default raised concerns that the mammoth project could eventually collapse and deal a blow to local builders and other investors amid a prolonged downturn in the local construction sector.
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