The E-Land Group, a major player in the hospitality industry, which includes properties such as the Kensington Hotel Saipan, Pacific Islands Club, and Coral Ocean Golf Resort, has decided to repay its perpetual bonds totaling 130 billion won without refinancing.
Sources within the investment banking sector reveal that the E-Land Group plans to exercise the call option on the 130 billion won bonds issued by its overseas subsidiary, Micronesia Resort, which has a 30-year maturity, by June. These bonds were originally issued to Dominus Investment, a private equity fund operator, in 2018 and 2019.
Initially, concerns over a potential increase in the debt ratio deterred the group from opting for repayment. However, recent cash inflows from subsidiary divestments and an uptick in real estate values have swayed their decision. Moreover, since the bonds are secured against overseas real estate, there appears to be an intention to save on interest costs, which could rise above 10% in a refinancing scenario.
To raise the 130 billion won needed for repayment, E-Land Park, a subsidiary of E-Land Group, plans to use internal funds. The specific method has yet to be determined, with speculation ranging from E-Land World issuing corporate bonds to lending money to E-Land Park or participating in its capital increase. E-Land World serves as the holding company of E-Land Group, with E-Land Park jointly owned by E-Land World (51.01%) and E-Land Retail (48.98%). Currently, E-Land Park holds a 99.61% stake in Micronesia Resort.
If E-Land Group fails to exercise the call option by June, Dominus Investment could invoke drag-along rights. However, such a scenario seems unlikely given the prevailing practice in South Korea, where issuers typically exercise call options every five years to mitigate escalating interest burdens associated with early redemption.
