[Alpha Biz= Kim Jisun] The recent fire at the high-end Banyan Tree Haeundae resort in Busan has triggered a major crisis in the financial sector, putting at risk project financing (PF) loans totaling KRW 375 billion. The consortium of lenders, including Meritz and BNK Financial Group, has considered declaring an event of default (EOD) but has chosen to defer such action due to the serious nature of the incident, which resulted in six fatalities.



According to sources in the investment banking industry on May 20, the lenders involved in the Banyan Tree Haeundae project financing—Meritz Consortium, BNK Financial Group, and KB Real Estate Trust—have decided to postpone the EOD declaration. Although the indefinite postponement of the resort’s opening has clouded the loan recovery timeline, the severity of the accident, public sentiment, and the involvement of trustee KB Real Estate Trust were taken into account in the decision.



The development is a luxury villa-type condominium project located in Busan’s Osiria Tourism Complex. The facility spans three underground and 12 above-ground floors. The total PF loan amounts to KRW 375 billion, with Meritz Consortium contributing KRW 190 billion, BNK providing KRW 115 billion, and KB Real Estate Trust lending KRW 50 billion. 

 

 

Loan recovery was initially expected upon the resort’s opening this month, but the fire incident in February brought construction to a halt indefinitely, prompting financial institutions to prepare for potential losses through loan-loss provisions.




Following the fire, the construction contract with builder Samjeong Construction was terminated, and trustee KB Real Estate Trust has taken over the on-site assets for management. The contractor, having filed for court receivership, is no longer capable of continuing the project. As the senior lender and asset trustee, KB Real Estate Trust is now tasked with normalizing the project.



Lenders may now face the need to inject hundreds of billions of won in additional capital to fund restoration and construction resumption, as neither the developer nor the original builder is in a position to provide further financing. KB Real Estate Trust, having taken over the project's assets, is expected to bear the brunt of this financial burden. The company plans to appoint a new construction firm and resume the project as soon as possible to regain momentum.

 

 

 

[ⓒ 알파경제. 무단전재-재배포 금지]