Firm arranges 927.9 billion won in financing for Gwangju and Pohang data centers; targets AI and edge facilities, GPU funding

Plans to build on Seoul Station Bongrae District 3 PF win with tailored financing structures

Kang Deok-beom, executive vice president and head of structured finance at Hyundai Motor Securities, speaks with The Herald Business at the firm's Yeouido headquarters in Seoul. [Hyundai Motor Securities]
Kang Deok-beom, executive vice president and head of structured finance at Hyundai Motor Securities, speaks with The Herald Business at the firm's Yeouido headquarters in Seoul. [Hyundai Motor Securities]

"The thing I tell my staff most often is that project financing is not everything. Markets keep turning. You have to think about and look for new things if you want to get ahead in the next market."

Kang Deok-beom, executive vice president and head of structured finance at Hyundai Motor Securities, sat down with The Herald Business at the firm's Yeouido headquarters in Seoul and identified data centers — where financial demand is growing on the back of AI expansion — as a new frontier for structured finance.

Hyundai Motor Securities has arranged a combined 927.9 billion won ($695 million) in financing for data centers in Gwangju and Pohang. The journey began in 2023 with a 500 million won equity investment in the Jangseong data center in Gwangju's Cheomdan 3 district. "The investment amount was not large, but I wanted to see the data center market firsthand," Kang said.

Over the roughly two years that followed, the firm co-developed the Gwangju data center project and designed its financing structure. The first project financing loan was drawn down in December last year, and construction broke ground in January. Hyundai Motor Securities arranged 365.9 billion won in financing, comprising 295.9 billion won in PF loans and 70 billion won in preferred shares. In the process, it underwrote 31.9 billion won in senior loans and 15 billion won in mezzanine loans before selling them to other investors. The firm has since moved into the second phase of the Gwangju data center project as well.

The experience gained in Gwangju carried over to the Pohang AI data center. Construction on the Pohang project broke ground in June, and the loan agreement was finalized on Sept. 23. Working alongside Woori Bank, Woori Investment Securities and KB Kookmin Bank, Hyundai Motor Securities arranged 562 billion won in financing — comprising 450 billion won in PF loans and 112 billion won in preferred shares — and advised on the project overall. Of that total, the firm underwrote 35 billion won in mezzanine loans and 15 billion won in preferred shares.

Hyundai Motor Securities plans to expand its footprint by targeting large-scale AI data centers outside the Greater Seoul area and edge data centers near demand hubs within the metropolitan area. The firm also aims to arrange GPU-related financing, with a goal of completing the first such deal in South Korea.

Tailored financing structures for every deal

Even within conventional project financing, the firm focuses on designing financing structures suited to the specific circumstances of each deal. "Even for the same type of project, what the developer, the contractor and the existing lenders want is all different," Kang said. "It is important to understand each party's requirements and rebuild the financing structure accordingly."

The Seoul Station Bongrae District 3 development is a prime example. Hyundai Motor Securities has served as lead arranger since land acquisition began in 2022. It arranged about 200 billion won in bridge loans across eight tranches timed to the project's progress — rather than borrowing a lump sum upfront, the firm drew down only what was needed for each stage, such as land purchases, cutting the period during which interest accrued on borrowed funds.

A complication arose during the transition to full project financing. Because demolition and cultural heritage surveys had not been completed, the contractor was unable to immediately submit a completion guarantee. Such a guarantee — a contractor's commitment to finish construction within a set period — is one of the key conditions financial institutions verify before extending PF loans.

Hyundai Motor Securities designed the financing in two parts: funds needed immediately were borrowed first, while the remainder could be drawn within an agreed limit once the completion guarantee was in hand. Both tranches carried equal repayment seniority. The structure allowed part of the full PF funds to be deployed before the guarantee was issued, reducing the cost of additional bridge financing.

Through this approach, the firm closed a 689 billion won PF with Shinhan Financial Group. "It is hard to differentiate on plain vanilla loans alone," Kang said. "You have to understand what each stakeholder wants and build a new funding structure around that."

On the investment side, the firm prioritizes asset quality over volume. Hyundai Motor Securities' PF exposure ratio fell 7.5 percentage points, from 38.3 percent at the end of last year to 30.8 percent in the first half of this year.

"If it is a good asset you can sell again at any time, 30 percent may even be too low; if it is filled with poor assets, it is too high," Kang said. Rather than stretching for higher returns by taking on excessive risk, the strategy centers on senior and mezzanine investment-grade assets with selective equity stakes added on top. "We aim for returns about 2 percentage points above traditional bond investments on a three-year basis," he said.

Kang set a goal of ranking first in investment banking among securities firms with equity capital in the 1.5 trillion to 2.5 trillion won range. "Rather than chasing short-term profits, we need to build a solid business foundation that the next generation can carry forward," he said. "Particularly in IB, we have to be No. 1."


hajun825@heraldcorp.com