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Posted : 2013-02-27 16:31
Updated : 2013-02-27 16:31

Macquarie rejects Seoul City Hall's conciliatory call

By Kim Jae-won

The Seoul Metropolitan Government (SMG) and Macquarie are continuing their dispute over the operation of Seoul Subway Line No. 9, after the Australian investment firm and other major investors rejected the city’s request to cut their guaranteed profit margin, SMG officials said Wednesday.

The city had asked the shareholders of Seoul Metro Line9 Corporation to cut the margin to 5 percent from 8.9 percent but Macquarie Korea Infrastructure Fund (MKIF), the second largest shareholder, refused to do so saying it will hurt investors’ interests.

“We think that the current revenue guarantee ratio is too high. We hope Macquarie will lower it to a reasonable level,” said Lee Chang-hak, spokesman for the city.

Lee also criticized Macquarie for asking for too high interest rates for its loans to the corporation _ MKIF lent 33.5 billion won in subordinated loans with an interest rate of 15 percent interest rate.

Under a contract signed in 2005, the city government agreed to guarantee an 8.9 percent profit margin for the corporation.

Macquarie was not available for comment.  

This is the latest phase on an ongoing dispute between the two parties that started in April 2012 when Seoul Metro Line9 Corporation announced that it would raise its one-way fare by 500 won without consulting SMG. It withdrew the plan one month later, facing strong opposition from the municipal government and citizens.

However, they clashed again as the corporation sued the city soon after.

A ruling is expected to come in May.

Observers say that if SMG wins the lawsuit, it may seek to terminate the contract with the company because other firms are showing interest in running Line No. 9 under better terms. The city is also considering establishing a public fund to operate the company.

MKIF is a subsidiary of Macquarie Group listed on the country’s main bourse. It is the second largest shareholder in the corporation with a 24.53 percent stake, behind Hyundai Rotem, which has a 25 percent stake. Shinhan Bank is the No. 3 shareholder with a 14.89 percent stake followed by Posco ICT with 10.2 percent.

Line No. 9 is the only private-run subway in the capital city. The municipal government operates the eight other lines under two subsidiaries which run four lines each.


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