Press Conference on Uijeongbu Light Rail Transit Bankruptcy Filing

Ahn Byung-yong, Mayor of Uijeongbu, held a press conference at 11 a.m. on the 6th to discuss initiatives undertaken since the project operator's bankruptcy filing related to the Uijeongbu Light Rail Transit bankruptcy, the city's position on the bankruptcy filing, and plans for future response measures.

Regarding the city's position on the bankruptcy filing, Mayor Ahn stated, "The project operator's claims of financial losses are highly spurious, and since the authority for contract termination lies with the competent authority following the bankruptcy order due to the operator's breach of obligations, Uijeongbu will continue to assert that the city bears no obligation to pay termination compensation."

In particular, Mayor Ahn addressed the financial loss claims by noting that of the cumulative loss of approximately 320 billion won as of the end of 2015, approximately 220 billion won consists of depreciation expenses related to the value of management and operating rights, with actual cash losses of approximately 100 billion won. Of this, the project operator's debt repayment obligations amount to approximately 60 billion won, and actual operational losses are approximately 40 billion won. Considering construction profit margins in the total project cost of 676.7 billion won, it is difficult to definitively characterize this as a loss.

Additionally, although the project operator was offered financial support of 50 billion won in temporary operational expenses by Uijeongbu, it is avoiding this support. Unlike general corporate bankruptcies, this case represents an abuse of the bankruptcy system where the project operator can expect a certain amount of termination compensation despite its breach of obligations. Mayor Ahn argued that GS Engineering & Construction, the largest shareholder of Uijeongbu Light Rail Transit Co., Ltd., despite recording favorable business performance with revenues exceeding 10 trillion won for two consecutive years recently and the highest revenue since its establishment, is clearly showing intent to evade the matter without any effort to reinvest or improve operations for the normalization of the Uijeongbu Light Rail Transit. This can be viewed as an attempt to escape contractual responsibilities and obligations by exploiting the bankruptcy system after securing construction profits during the construction phase, which would trigger negative repercussions on the private investment system as a whole.

Therefore, Uijeongbu will move forward with legal responses including filing for rehabilitation proceedings and damages claims by establishing a consulting agreement with a specialized law firm's bankruptcy task force. The city will also carefully establish and implement response plans including funding methods, operational measures, and facility acquisition.

[Major Initiatives Following Project Operator Bankruptcy Filing]

2017.1.11. Project operator bankruptcy filing (Seoul Central District Court)

2017.1.12. Uijeongbu statement released (Remarks to Citizens Regarding Light Rail Transit Bankruptcy Filing)

2017.1.13. Uijeongbu Light Rail Transit Crisis Response Task Force established

2017.1.19. Operations consultation meeting (Discussion on follow-up operational measures with railroad operation experts)

2017.1.25. Information session inviting key regional figures related to bankruptcy filing

2017.1.31. Competent authority opinion submitted to court regarding bankruptcy filing

2017.2.2. Competent authority statement delivered (Seoul Central District Court)