South Korea’s KB Asset Management Co. is set to list its Balhae Infrastructure Fund (Balhae) on the country’s main bourse Kospi in the second half of this year. If it goes public, it will be the first homegrown infrastructure fund to succeed in an initial public offering, as well as a second public infrastructure fund following the Macquarie Korea Infrastructure Fund (MKIF) listed on the Kospi in 2006.
Balhae has chosen KB Securities Co. as an IPO lead manager and is aiming for a public offering in October, according to investment banking sources. Its corporate value is expected to reach more than 1.5 trillion won ($1.1 billion) after the IPO, according to sources.
The fund was created in 2006 with an aggregate commitment of 1.2 trillion won from 17 Korean limited partners. Among them are National Pension Service (NPS) and Kookmin Bank who both injected 150 billion won, each acquiring a 12.61% stake. Samsung Life Insurance Co., Government Employees Pension Service (GEPS) and Teachers’ Pension (TP) also each invested 100 billion won, each buying an 8.40% stake.
The fund’s capital was injected in some toll road and tunnel operators in Korea, including New Daegu Busan Expressway Co., Yongma Tunnel Co., Namyangju Urban Expressway Co., Suwon Beltway Co. and Sansung Tunnel Co. The fund has a balance of 850 billion won, emerging as a flagship fund of KB Asset Management managing 12 trillion won worth of infrastructure assets.
KB Asset Management accelerated listing the fund as the Korean government eased regulations on public infrastructure funds in 2020 when it announced the Korean New Deal, a 160 trillion won national development plan focusing on the digital and green economy. Under the revised regulations, public infrastructure funds’ debt ratio limitation increased from 30% to 50% of equity.
Also, the ratio of non-infrastructure assets, such as gold and bonds, to public infrastructure funds increased to be allowed to up to 30% of the funds’ assets. Additionally, the government stated when it selects asset managers for its New Deal Infrastructure Fund, it will favorably consider the asset managers which have experience in listing infrastructure funds.
KB Asset Management planned for Balhae's IPO in 2020, however, the plan failed due to the delay of the approval process and NPS’ screening.
The asset manager is aiming to sell some of the equities and issue new equities through an IPO. It is considering investing in the Capital Region First Ring Expressway in Seoul, the Gangnam Beltway and the Busan–Gimhae Light Rail Transit for the fund’s portfolio expansion.
The fund's target annual dividend yield ratio is 6-7%. Macquarie’s infrastructure fund, the only listed infrastructure fund in Korea, has a market capitalization of 4.9 trillion won and a 5.4% dividend yield ratio.
“Tolls are escalating in line with the consumer price index in Korea. Infrastructure will garner more attention from the market as it benefits from inflation, as well as separate taxation rates for dividend income,” an IB source said.
Write to Ye-Jin Jun and Tae-Ho Lee at
ace@hankyung.comJihyun Kim edited this article.
