November 7, 2022
SEOUL – Legoland Korea Resort, a theme park in Chuncheon, Gangwon Province that opened in May in partnership with a local developer, does not plan to cut back on its operations and will fund any further expansion itself, regardless of the developer’s recent default, the UK-based attractions operator Merlin Entertainments told The Korea Herald last week.
“Any plans Merlin has for future investment are wholly financed by itself,” a spokesperson for Merlin said in an email.
But whether the company will lodge a legal complaint against Gangwon Province — which had allegedly tried to pull back from the partnership agreement without sufficient grounds, prompting the default — is still uncertain, because details of the deal could not be disclosed.
“Neither Merlin Entertainments Group nor its wholly owned subsidiary, LEGOLAND Korea Resort (LLKR) are at liberty to disclose details of the agreement with Gangwon Province as we are under a contractual obligation of confidentiality,” the Merlin spokesperson added.
Early in October, Gangwon Jungdo Development Corp., the local developer, defaulted on 205 billion won ($145 million) in bond payments due on Sept. 29, in a blow to market expectations for a government guarantee. The firm was set to enter into rehabilitation for fiscal austerity — a decision the Gangwon governor quickly went back on after being assailed for floating a “politically-charged,” half-baked plan since Kim Jin-tae, the first-term governor, had enough resources to make the deal work.
He hurriedly advanced the payment deadline to Dec. 15 from Jan. 29 next year, but the fiasco had already upended the bond and short-term money markets. Investors were rattled by what they saw as the transactional nature of a government guarantee. To restore market calm, the government, central bank and even the country’s banking giants upon the government request put together a funding backstop to contain the risks of growing liquidity stress.
“It’s like a bomb blast ripping through the markets because the top-rated asset-backed commercial papers instantly became junk. Who would have really thought that was possible? It’s an all-bets-are-off situation for investors now,” said Hwang Sei-woon, a senior research fellow at the Korea Capital Market Institute.
The fallout is palpable. According to the latest data that Korea Electric Power Corp. revealed Sunday, the top-rated state firm had failed to get enough bidders for its bonds last month for the first time in three years. The “Legoland crisis” was what had prompted the unexpected gap, the firm told Rep. Chung Il-young of the Democratic Party of Korea in a submission asked by the lawmaker sitting on the National Assembly’s trade committee.
Two other top-rated state companies — Korea Gas Corp. and Korea Hydro & Nuclear Co. — suffered more from a lack of bidders for their AAA rated bonds. They failed to find a single bidder for bonds worth 200 billion won and 100 billion won, respectively, also in October.
Rep. Chung, who also sits on the special committee on the government budget, rebuked the government for having done little to prevent the Legoland default from spilling over into the wider financial market. He called the government response “inadequate and amateurish.” Chairman Kim Joo-hyun of the Financial Services Commission, the top financial regulator, acknowledges that the government intervention came a little late.
Long-term profitability in doubt
But resurfacing worries over the theme park’s long-term profitability increasingly chips away at the government’s support and Merlin’s determination to run the park as planned. Such concerns, along with bureaucratic red tape, had already led to the opening being delayed by 11 years. The Chuncheon theme park is the first and only Legoland on an island. It is the largest in Asia and the second-largest in the world, after Legoland New York.
Lower-than-expected demand is taking a fresh hit from default rumors, though Merlin categorically denies them as unsubstantiated. Nevertheless, an increasing number of people are debating whether their annual passes to the attraction are really worth the cost.
“It’s about a two-hour drive from Seoul to Chuncheon and the passes, one-day or annual, are not that cheap, considering all the attractions you see there are just for kids under 12. It’s worth a trip for a day, but a second run? I’m not so sure.” said Kim, a father of a preschooler who lives in Seoul and asked to be identified by his surname only.
Kim, 39, referred to “winter shutdowns” from January to March next year, when the park will be closed for annual safety checks. The park offers a free 90-day extension for annual pass holders, but Kim and many other local tourists holding the passes say they have to sacrifice too much.
“The extension doesn’t cut it. The reason we buy the passes is they allow us to make the trip ‘whenever we want’ at a lower price, and that’s without a doubt when kids are on winter or summer vacation. Why does it take three months to run safety checks? An extra 90 days are useless if we can’t take advantage of school vacation,” Kim said.
Merlin said its operating days and months are not only in line with local “weather conditions and climate” but is based on “Legoland’s 55 years of experience operating an outdoor amusement park for young children and their families,” highlighting safety concerns. A half-price ticket to Seoul’s Coex Aquarium will be given to those annual pass holders to make up for the winter suspension, in addition to the 90-day extension, the park operator noted.
“The thing is, I don’t see what being on rides at an attraction and seeing fish swimming in a tank have in common, really. If I can’t see it, kids certainly won’t.” Kim said.