[10-Year Urban Logistics Stalemate] ⑤ 1 Trillion Won Loan Before Groundbreaking... Liquidity Warning

Harim Industries’ Yangjae Logistics Complex Secured Short-Term Borrowings of 939.2 Billion Won

Maturities Concentrated Next Month

Cash Holdings at 70 Billion Won Level

Virtually Insufficient for Repayment

Funding Infusion from

It has been revealed that Harim Industrial, the company responsible for the development of the "Yangjae City Advanced Logistics Complex (Yangjae Logistics Complex)" promoted by Harim Group, borrowed close to 1 trillion won using the site as collateral. As the approval process for the Yangjae Logistics Complex development has failed to progress for ten years, the company entered the food business, such as launching "Themisik Ramen," and poured massive investment funds into it. With the maturity of over 900 billion won in short-term loans concentrated at a single financial institution imminent, delays in the groundbreaking are further increasing the financial burden.

According to the Financial Supervisory Service's electronic disclosure system on May 11, Harim Industrial, a subsidiary of Harim Holdings, raised a total of 939.2 billion won in short-term borrowings from KB Kookmin Bank, using the land in 225 Yangjae-dong, Seocho-gu, Seoul, as collateral. This consists of a 636.5 billion won general loan and a 302.7 billion won facility loan, both with maturities of less than one year. The market sees that a significant portion of these loans will mature around June of this year.

900 Billion Won in Short-Term Loans... 'Loss-Making' Ramen Production Secured by Yangjae Logistics Complex

Harim Industrial, established in 2012 for Harim Group's distribution business, participated in a 430 billion won paid-in capital increase by Enbycon, a subsidiary of NS Shopping (itself an affiliate of Harim Holdings), in May 2016, acquiring 100% of Enbycon's shares. At that time, Harim Industrial was a subsidiary of NS Shopping, and the Yangjae Logistics Complex development project, which NS Shopping acquired through Enbycon, was transferred to Harim Industrial in the same year.

However, as the approval for the Yangjae Logistics Complex continued to be delayed, Harim Industrial merged with Harim Foods, another NS Shopping subsidiary, in 2019 and entered the food business. That same year, Harim Industrial invested 200 billion won to build a food factory in Iksan, North Jeolla Province, and after launching "Themisik Ramen" in 2021, it expanded its product lineup to include instant rice, dumplings, soups, stews, and sauces.

The problem lies in the performance. Last year, Harim Industrial posted sales of 109.3 billion won, but recorded an operating loss of 146.6 billion won and a net loss of 169 billion won. The previous year also saw sales of 80.2 billion won with an operating loss of 127.6 billion won, resulting in continued operating deficits. Losses have exceeded sales, and rather than generating cash from business operations, the company continues to see large cash outflows.

Affiliate Capital Injections Also Snowballing

Harim Industrial has had a high dependence on affiliates since the early stages of the Yangjae Logistics Complex development. In 2016, when the Yangjae site was purchased, NS Shopping injected funds through a paid-in capital increase of about 480 billion won. From 2017 to 2021, more than 100 billion won was added through several additional capital increases. After restructuring the ownership structure, Harim Holdings directly provided funding, putting in about 180 billion won from 2022 through last year to fill the funding gap resulting from project delays.

However, despite this capital infusion, continued investments in the food business made it impossible to meet capital needs. In 2024, the scale of borrowing expanded rapidly. Short-term borrowings, which stood at about 130 billion won at the start of 2024, grew to 230 billion won in March and 330 billion won in September of the same year, with an additional 28 billion won loan from NS Shopping. Last year, Harim Industrial secured an additional 372 billion won from financial institutions, pushing total borrowings above 800 billion won. This exceeds 100% of its equity capital, meaning leverage has increased significantly. Borrowings have since become concentrated at Kookmin Bank, now totaling 939.2 billion won.

The method of capital raising has also changed. While initial funding mainly came from affiliates, reliance on real estate-secured financial borrowings has surged recently. In fact, Harim Industrial has set up collateral of about 1.1 trillion won against investment properties worth approximately 1.7 trillion won, including the Yangjae-dong site, and has separately pledged tangible assets such as land, buildings, and machinery to financial institutions.

Last year, Harim Industrial switched its accounting for investment properties from the cost model to the fair value model, increasing its book asset value from 495.4 billion won to 1.7016 trillion won. This is a "valuation increase" unrelated to actual cash inflow.

Yangjae Logistics Complex Groundbreaking Delayed... Liquidity Crisis Looms if Kookmin Bank Roll-Over Fails

With the groundbreaking of the Yangjae Logistics Complex delayed for nearly 10 years, there is a significant gap between the original funding plan and current circumstances. According to the initial plan, of the total project cost of 6.8712 trillion won, borrowings from financial institutions were to be limited to about 650 billion won, and more than 3.8 trillion won was to be covered by sales and rental income. In reality, however, with no sales revenue generated, short-term borrowings alone have exceeded 900 billion won. The project structure has shifted from "repayment through sales" to "sustaining through borrowing."

The investment schedule is also heavily front-loaded. About 2.7 trillion won is planned to be invested in 2024 alone, with 700 billion to 900 billion won to be continually invested each year thereafter. In contrast, capital recovery depends on sales and leasing after construction begins. If groundbreaking is delayed, a capital gap is inevitable.

By nature, the development project structure typically involves upfront investment in land and approval costs, with recovery through project financing (PF) and sales revenue later. However, in the Yangjae project, delays in groundbreaking have prevented PF conversion, resulting in increased reliance on short-term borrowings.

As of the end of last year, Harim Industrial's cash and cash equivalents amounted to only 70.4 billion won. This is less than 10% of its short-term borrowings. It is virtually impossible to repay borrowings with cash generated from its own operations. The market has assessed that "unless maturities are extended through roll-overs, repayment itself will be difficult."

The key point is what happens after the loans mature. The financial sector believes that if Kookmin Bank extends the loans, a short-term liquidity crisis can be avoided, but if the roll-over does not proceed smoothly, the situation could deteriorate rapidly. In particular, if the Yangjae project cannot move to a full-fledged PF stage, the dependence on short-term borrowings is likely to become prolonged, which may further increase risk.

The market is also paying attention to the possibility that this problem could spread beyond Harim Industrial to the entire group. As the project is considered a core growth strategy for the group, it is expected that if a funding crunch materializes, additional support from the holding company may become inevitable.

This content was produced with the assistance of AI translation services.