Brookfield aims to increase debt on IFC Seoul to $2 bn

Brookfield Asset Management Ltd. will increase its debt on the International Finance Center in Seoul (IFC Seoul), South Korea to up to 2.7 trillion won ($2 billion) through refinancing and will recover its equity investment as the Canadian alternative investment firm sees the complex’s value to have risen to around 4.1 trillion won, banking sources said on Monday.   

Brookfield acquired IFC Seoul, comprised of five-star hotel Conrad Seoul, three office towers and a shopping mall, at 2.55 trillion won from American Insurance Group (AIG) in 2016. The Canadian asset manager borrowed 1.81 trillion won for the deal at the time.

In a refinancing deal in November 2019, Brookfield increased the debt to 2.28 trillion won at lowered interest rates with five-year maturities. With expanded debt, the asset manager recovered 480 billion won of its 750 billion won equity investment.

Brookfield may completely recover its equity investment in the complex through the next round of refinancing, banking sources say. 

The Canadian firm, slated to tap a deal manager among Kookmin Bank, Shinhan Bank and NH Investment & Securities Co., is planning to use a 60-65% loan-to-value ratio in the refinancing, based on a 4.1 trillion won valuation for IFC Seoul.

Senior secured loans will be in the low 5% range per annum, and mezzanine debt will be at the 7% level, sources said.

The existing debtors in the asset are likely to participate in the deal again as each tranche’s yield has risen around 200 basis points compared with the previous refinancing in 2019, sources added.

In the 2019 deal, affiliates of KB Financial Group Inc., NongHyup Financial Group Inc., Samsung Life Insurance Co. and Samsung Fire & Marine Insurance Co. invested in senior secured loans. Some local pension funds, mutual aid associations and other nonbank financial institutions bet on mezzanine debt.

Brookfield has sought to exit from the IFC Seoul complex since late 2021. Seoul-based Mirae Asset Global Investments Co. was selected as the preferred bidder for the asset valued at 4.1 trillion won in May 2022. 

But the deal broke down in September 2022 as the Korean government rejected Mirae Asset’s financing plan, saying the scheme was heavily dependent on borrowing and could hurt investors.  

Mirae Asset reclaimed the 200 billion won deposit and took the case to the Singapore International Arbitration Centre for a refund after the deal's collapse. The center hasn’t delivered its conclusion on the case yet.

Last October, Brookfield began a procedure to sell off Conrad Seoul at more than 500 billion won as it saw divesting the whole complex would be difficult in the real estate market with elevated interest rates. 

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com
 


Jihyun Kim edited this article.