Bankruptcy of Legoland Korea Developer Causes Bond Market Scare and Political Finger Pointing
Who would have imagined that the bankruptcy of the Legoland Korea amusement park could lead to such negative economic impacts in South Korea:
Gangwon Province Governor Kim Jin-tae has been facing criticism from both the ruling and opposition parties for his “hasty” decision not to fulfill a payment guarantee for the developer of Legoland Korea, creating a liquidity crunch in the nation’s corporate bond and commercial paper markets.
During the ruling People Power Party’s (PPP) emergency committee meeting, floor leader Rep. Joo Ho-young blamed Gangwon Governor Kim Jin-tae and warned of a butterfly effect.
“The Gangwon governor’s announcement not to fulfil the payment guarantee, despite its capability, has sowed distrust and created a big stir in the market,” Joo said.He was also critical of Kim’s predecessor, former Gangwon Province Governor Choi Moon-soon of the main opposition Democratic Party of Korea (DPK), saying Choi pursued the Legoland project “without considering the financial status of the province, whose financial independence stands at a mere 27.4 percent this year,” while adding that Governor Kim is also responsible for amplifying the market concerns.
“We have to remember that a butterfly flapping its wings sometimes causes a storm,” Joo said.
Joo’s remarks came a day after the government said it would expand the provision of liquidity to over 50 trillion won ($34.7 billion) hoping to ease jitters in the country’s bond market stemming from the “Legoland shock.”Gangwon Jungdo Development Corp. (GJC), the developer of Legoland Korea, established a special purpose company to fund the construction of the Legoland resort, but declared bankruptcy on Oct. 6 after missing a payment of a 205 billion won asset-backed commercial paper issued by the special purpose company.
Korea Times
Gangwon Province had guaranteed the commercial paper’s payment, but on Sept. 28 it declared that it would file for GJC’s bankruptcy to a local court, instead of paying the debt.
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