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| Mirae Asset Financial Group headquarters in central Seoul / Courtesy of Mirae Asset Financial Group |
By Anna J. Park
Mirae Asset is facing the potential loss of a huge sum of the principal put in its overseas investment in the Frontera gas-fired power plant project, as the Texan plant owner filed for bankruptcy earlier this month.
Earlier, Mirae Asset Financial Group's three affiliates and the Korean Teachers' Credit Union (KTCU) jointly decided in 2018 to invest a total of 160 billion won ($144 million) ― 80 billion won each ― providing senior secured debt loans to the natural gas plant that sells its electricity to Mexico.
Back then, the investment had been considered stable and profitable, as global asset manager Blackstone Group owned 100 percent equity of the plant operator, Frontera Generation Holdings. It was the first overseas infrastructure investment by the KTCU, the manager of teachers' pension funds.
However, the coronavirus pandemic disrupted energy demand in the market last year, leaving the gas plant in Texas in a liquidity crisis. Unable to fulfill debt payments for 2021, the power plant turned to Chapter 11 bankruptcy at the U.S. Bankruptcy Court in Houston earlier this month to get rid of nearly $800 million in debt.
Blackstone, sensing the liquidity risks amid the global pandemic situation, already retrieved its entire principal through capital restructuring.
Mirae Asset, while admitting that it's true the gas plant filed for the Chapter 11 process, explained that nothing has been confirmed about its loss, as it's now time to watch how the legal procedures pan out.
"The legal process in the U.S. has just begun, so nothing about the specific amount of loss or how the senior debt would be restructured has been decided," an official from Mirae Asset said.
The official added that as the Korean institutional investors are senior creditors, they're expected to get back some of the gas plant's assets. Plus, there's still a possibility that once the pandemic situation is better, the plant's asset value could be improved again. He also explained that the entirety of the money invested by Mirae Asset is solely the firm's asset, without having any retail investors' money put into it.
Regarding a question why the Korean investors couldn't get out of the debt loans when the original plant owner Blackstone withdrew its principal, the official said the senior secured debt was a tranche-structured product, and exact details of the deal have not been released to the public.
