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Korea fund buys first toll road
By Geoff Hiscock, CNN Asia Business Editor
SYDNEY, Australia (CNN) -- An Australian-backed infrastructure fund in South Korea has made its first purchase, spending 177.8 billion won ($142 million) on a toll road in the southern city of Kwangju. Macquarie Bank and Shinhan Bank, the joint managers of the Korean Road Infrastructure Fund (KRIF), said Monday they had bought the concession from a consortium led by Daewoo Engineering & Construction. The deal covers the 28-year concession rights to a 5.6-kilometer section of the Kwangju Second Beltway, a toll road in South Korea's fifth-largest city. KRIF was set up by Australia's Macquarie Bank with its joint venture partner Shinhan Bank in early January, raising 247 billion won ($207 million) from Korean institutional investors. (Full story) KRIF, which is a closed 10-year fund, said it aimed to double commitments to 500 billion won ($397 million) by the middle of this year. Macquarie and Shinhan committed 30 billion won and 45 billion won respectively to KRIF, with the balance coming from Korean pension funds and insurance groups such as Dongbu Life and Kyobo Life. In a statement to the Australian Stock Exchange on Monday, Macquarie Bank said the purchase price of the Kwangju toll road concession was funded through 47.8 billion won ($38 million) in equity from KRIF, with the rest coming from non-recourse debt raised in the Korean syndicated loan market. Macquarie said KRIF had won exclusive or preferred positions to invest in six toll road assets in Seoul and other major cities in Korea. Three were already operating and three were under construction. "All assets have concession rights of 20 years or more," Macquarie said. The Kwangju deal continues Macquarie's aggressive push for infrastructure opportunities around the world. It already manages more than $6 billion in 10 infrastructure funds. In addition to the Soojongsan tunnel in Korea's southern port city of Busan, the funds have invested in toll roads and airports in Australia, the Midlands Expressway in the UK, Highway 407 in Canada, Aeroporti di Roma in Italy, and other assets in Germany, Spain, Chile, Portugal, the U.S. and South Africa. Macquarie's partner Shinhan is likely to become South Korea's second-largest banking group later this year if it succeeds with its bid to take control of fourth-ranked Chohung Bank. The South Korean government, which owns 80 percent of Chohung, chose Shinhan as its preferred bidder in January. Shinhan's single largest shareholder is French bank BNP Paribas with a 4 percent stake.
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