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South Korea’s economic policy chiefs, led by Finance Minister Choo Kyung-ho, said Sunday the government would expand liquidity facilities to buy corporate bonds and commercial paper to stop a recent credit default from spilling over into the wider financial market.
“The government will earmark 50 trillion won ($34 billion), at the least, to avoid a liquidity crunch,” Choo said, noting the fund will be used starting Monday to calm growing worries over the corporate debt markets. They were prompted by delinquency issues surrounding a local Legoland theme park in Chuncheon, Gangwon Province, which opened to the public in May after yearslong delays over profitability concerns.
Earlier this month, the local developer that built the park in partnership with Merlin Entertainments, a United Kingdom-based attractions operator, declared it had defaulted on the overdue payments worth $142.3 million. Investors were spooked because the top-rated short-term papers were backed by Gangwon Province in what many saw as a provincial guarantee against any insolvency.
Kim Jin-tae, governor of Gangwon Province, fueled worries Friday, when he said he would still take the company into court receivership. The governor, however, moved to downplay concerns over a default spillover, saying his office would deliver on the liabilities using the provincial budget that he said would be finalized by year-end.
“All of the outstanding debts will be cleared by Jan. 29 next year,” Kim told reporters, saying liquidating the company assets under court supervision was still necessary to pay off taxpayer money put into the park.
