The local government also "can't pay it back"... 'Legoland aftermath' shakes the financial market

<Anchor>

Legoland opened in Chuncheon, Gangwon-do, on Children's Day this year.

However, this amusement park visited by many children is shaking the Korean financial market.

This is because Gangwon-do gave a guarantee of 200 billion won to the company that developed Legoland, but declared that it would not be able to repay the money.

In a situation where interest rates are rising and money lines are drying up, investors are anxious because even local governments say they will not take responsibility, and more and more companies are having difficulties with money not circulating well in the market.

Let's take a look at the reporter Kim Jung-woo's report first and explain more about this.

<Reporter>

As the Legoland incident showed signs of running out of corporate money, the authorities began to evolve.

It announced that it would invest 1.6 trillion won to buy corporate bonds.

Companies were already struggling to borrow money from investors by issuing corporate bonds, but they had to pay interest more than the rising base rate.

However, if the local government, Gangwon-do, said that they would not be able to repay the money, there was even a feeling of anxiety that general companies would be terrified.

The gap in bond yields widened to the highest level since the financial crisis on fears of losing money after investing.

That's how hard it is to borrow money.

[Sewoon Hwang/Senior Research Fellow, Capital Market Research Institute: It can be evaluated that the normal market function of the funding means is undermining the upper part because it has shown that even a case with a guarantee by the local government can be sufficiently collapsed.]

As the money line is blocked and the real estate market is frozen, the danger signals are on from the construction companies that have invested in the development project and the financial companies that have invested in it.

[Construction company official: There was a bit of this kind of atmosphere in 2010, but when the sale market was not good.

The market is not good, and there is no sale.

'Can a construction company invest in corporate bonds like this?'

Because of this kind of atmosphere.]

In this month of anxiety, a number of companies are struggling because their bonds are not selling despite their good credit ratings.

(Video editing: Lee Seung-yeol, VJ: Kim Sang-hyeok)

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<Anchor>

Let's talk more with reporter Kim Jung-woo. 

[Reporter Kim Jung-woo: Yes.

As the problem got bigger and bigger, he announced that he would pay off the entire 205 billion won in next year's budget in three weeks.

I asked the bond experts today.

First of all, the changed branch will review the business of the previous branch, which was not a big problem.

The real problem is this.

Gangwon-do had no way of not paying off its debts in the first place.

Rather, in a situation where it is difficult to raise money right now, Gangwon-do has put a self-reliance on itself, undermining its trust and not being able to raise funds.

Still, there were many opinions that they threw stones in the wrong place, even though it was difficult in many ways due to the rising interest rates.]

[Reporter Kim Jung-woo: If the business is not bad, but the company cannot obtain funds, there are not many ways to choose from the company's point of view.

Even if you pay a high interest rate first, there are ways to borrow money from other sources or open hands with group affiliates.

This is what we already experienced during the 1997 Asian financial crisis, where small incidents grew like dominoes, leading to mass unemployment and bankruptcy.]

[Reporter Kim Jung-woo: Since Gangwon-do has changed its position, it would be good if it was accepted as a simple happening in the financial market.

Experts say that the current market situation is not so favorable.

Still, I want to cry because bond issuance is blocked, but it's a blow.

So even now, the financial authorities will step in and invest a lot of money to prevent the situation from getting worse in the future.

There are voices saying that it is important to give this message to the market.]