The new year is barely a month old, but Chairman Yoon Jong-kyoo of KB Financial Group has been very active in the investment banking sector as the group was named the priority bidder for the Incheon International Airport High-speed Railroad. The group also played the leading role as joint lead manager in securing 510 billion won in financing for the Chuncheon Combined Cycle Thermal Power Plant Construction Project.
Chairman Yoon led KB Financial Group over investment banking rival KDB Financial Group to win priority bidding rights for the speed rail line connecting Incheon and the Incheon International Airport on Yongjong Island off Incheon.
The Korea Rail Authority has picked the consortium of Kookmin Bank and the Industrial Bank of Korea (IBK) as the priority bidder for the project to rearrange Incheon International Airport High-speed Rail over a consortium made up of Korea Development Bank and Shinhan Bank, which was the only other participant in the open bidding.
Around 25 banks, life insurance firms and retirement funds are participating in the consortium as financial investors. Korail will soon sign an MOU with the Kookmin Bank consortium and conclude the sale of the high-speed rail linking the international airport in the first half of the year.
Korail conducted a series of serious investigations in picking the Kookmin Bank consortium, including profit ratio, service charge on securing funds and the plan on securing funds through its affiliate Korea Transportation Institute. The consortium is expected to take on part of the stake in the high-speed rail for 1.36 trillion won and arrange a replacement loan to pay off the 2.81 trillion won in loans that Korail borrowed to build the high-speed rail. The consortium should refinance a total of 3.855 trillion won — without the funds it paid for its stake in the high-speed rail and the loans that Korail borrowed — to finance the construction of the high-speed rail.
The successful consortium had a tough time outbidding the KDB consortium. It had to go as far as showing Korail officials the details of its plan to win the bid, including the interest rate it might have to pay to secure funds, and win the confidence of Korail officials concerned with the bidding.
The main points of investigation for the bid offers were the price and the non-price sectors, with interest rates being the key area on the price, while a plan to secure funds was key to the non-price sector, financial market sources said.
The KDB consortium was the favorite to win the bid. It eventually won due to its daring move to show Korail officials the interest rate it would have to pay to get the funds. The move by the KB consortium won the trust of the Korail officials. The make up of the consortium also won the trust from Korail officials, as it included IBK, another bank with a large government stake and around 25 financial institutions, including insurance firms, banks and retirement funds joining the consortium as investors, financial market sources said.
Kookmin Bank is encouraged by winning the bid as it will be a boost for its target of divvying out some 5 trillion won in loans connected to infrastructure projects this year, about 10 percent above last year’s record of 4.5 trillion won in loans provided to the projects related to infrastructure. The interest rate is around 3.6 percent per annum, slightly higher than the rate the KDB consortium offered.
