Hanam Urban Innovation Corporation is raising funds through a bond issuance. Hanam Urban Innovation Corporation is a public corporation established with an equity investment by Hanam, Gyeonggi Province, and engages in real estate development and supply. Its financial condition has deteriorated sharply recently as it carried out land preparation work for Hanam Gyosan District (Gyosan New Town), one of the third-phase new towns. The corporation, which had operated without borrowing through 2020, swung to a loss in 2024, and as of the first half of last year, net debt exceeded 130 billion won. The credit rating industry expects the corporation's finances will not easily improve until before 2027, when payments from pre-sales in Hanam Gyosan District begin to flow in in earnest.
According to the financial investment and construction industries on the 23rd, the corporation plans to obtain a credit rating and conduct a book-building process to issue a special-purpose bond. The corporation announced that it plans to issue a two-year "Hanam Urban Innovation Corporation 2026-01" bond on this day. The issue date is Feb. 4, with bidding on Feb. 3, and the target size is around 70 billion won. The corporation said, "Depending on market conditions, the issuance quantity may be adjusted, and the size may be reduced or there may be no successful bidder due to changes in the corporation's funding method at the time of bidding." The interest rate will be determined by adding a spread to the individual average yield of the corporation's "AA" credit rating, based on the private bond evaluators' average yield, on the day before issuance.
The reason the corporation is pursuing a bond issuance is that its recent financial deterioration has disrupted project execution. The corporation, which recorded 37.4 billion won in operating profit in 2023, swung to an operating loss of 12.3 billion won in 2024. Net debt, excluding cash and cash equivalents from total debt, also increased to 130.6 billion won as of the end of June last year. At the end of 2020, cash and cash equivalents exceeded debt by more than 100 billion won, but in four years and six months, debt increased by more than 230 billion won. A corporation official said, "We plan to proceed with the bond issuance and will finalize the interest rate and offering size through the book-building process."
The corporation's worsening financial condition stems from land compensation for the government's third-phase new town development. The government is pursuing development of Hanam Gyosan District as one of the third-phase new towns. The project period runs from 2019 to 2028, with a total project cost of 14.483 trillion won. Hanam Urban Innovation Corporation must shoulder 5% of that, or 724.1 billion won. Most of it is used to pay land compensation to the original owners to prepare residential sites. In Gyosan District, housing construction began and subscriptions were conducted for some parcels last year. However, most subscriptions are expected to take place after 2027.
Kim Chang-su, senior researcher at NICE Investors Service, said, "The financial condition worsened due to the injection of land compensation payments for the Gyosan public housing district," adding, "Once pre-sales proceed, the borrowing fund can be repaid." Kang Seong-mo, a researcher at Korea Ratings, also said, "At present, the corporation has no revenue sources among Hanam's development projects, but as the Gyosan District project proceeds, the corporation's financial condition will gradually improve."
Although its financial indicators are deteriorating, the corporation must participate as an equity investor in Hanam's major development projects. A representative case is the Camp Colburn urban development project on returned U.S. military land. The project aims to create a future-oriented advanced industry convergence complex on approximately 250,000 square meters of the Camp Colburn site, a returned U.S. military support area in Hasangok-dong, Hanam. The projected project cost is 260 billion won, and a special-purpose company (SPC) will be established for joint public-private investment.
The corporation's equity is also needed for the "K-culture complex complex (K-Star World) project," which will build a complex K-content cluster combining creation, production, performance, and experience functions, including a K-pop–dedicated arena with 20,000–30,000 seats, a world-class video studio, and an academy. The plan is to develop it on 900,000 square meters on Misa Island near the Misa rowing stadium, with the project cost expected to reach 3.4 trillion won. The "H2 Project for an advanced cultural complex," which is being promoted on 162,000 square meters around 108 Changwoo-dong, is also an equity investment project of the corporation.
However, Hanam is not considering additional equity injections into Hanam Urban Innovation Corporation beyond the bond issuance. Hanam also lacks the capacity to invest in the corporation because its debt is piling up. According to Hanam's "2025–2029 debt management plan," the city's debt is estimated to more than double from 33 billion won in 2024 to 77.7 billion won in 2025. Debt is also expected to increase to 85 billion won this year. A Hanam official said, "For now, we are not considering additional equity injections into the urban corporation."
Lee Eun-hyung, a research fellow at the Korea Institute of Construction Policy, said, "Because local urban corporations have limited funding options, the only way to respond to deteriorating financial soundness is to take out loans or issue bonds," adding, "However, if unsold units occur during the new town development process and pre-sale proceeds cannot be collected, the financial condition could worsen further and bond issuances could continue."