Missile-Threatened Guam Lures Korean Cash as Tensions Ease

(Bloomberg) -- North Korea was threatening just last year to annihilate Guam. Now that military tensions have eased, South Koreans are visiting the western Pacific island in droves, and investors are becoming interested in what it has to offer as well.

Korea Investment Management Co., Meritz Securities Co., and private clients of Shinhan Bank are among Korean investors putting $275 million into the debt of a private hospital in Guam, according to its financial adviser. The three-year senior secured debt is for Guam Regional Medical City, a 136-bed private hospital opened in 2015, Pi Capital International LLC said.

Korean institutional investors have been searching for better returns overseas as they face low interest rates and lackluster equity returns at home. It’s perhaps not surprising that Guam has been chosen as one investment destination, considering that the island has become a magnet for Korean tourists: they increased 15.9 percent in 2018 to make up 49 percent of all visitors to the island in fiscal 2018, more than from any other country, data from the Guam Visitors Bureau show.

Investors in South Korea are reviewing more investment opportunities in Guam, especially in hotel development and hospitality as tourism rises, said Matthew Yoon, a Seoul-based managing director at Pi Capital, a New York-based firm that advises on mergers and acquisitions.

Read more: Korea Funds Buy U.S. Property Debt as Goldman Warns on Valuation

The GRMC deal is structured into five tranches, several of which are backed by the hospital’s patient billing and insurance reimbursements, according to Pi Capital. The proceeds will be used for refinancing debt, settling accounts payable and working capital, it said.

There’s an option to extend the three-year loan by one year, and GRMC is qualified after that to get financing from the U.S. Department of Housing and Urban Development, Yoon said.

Guam has high rates of diabetes and heart disease, and as many as 20,000 residents had to leave the island annually to seek hospital treatment before the medical center was opened in 2015, according to Pi Capital.

To contact the reporter on this story: Kyungji Cho in Seoul at kcho54@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum, Peter Pae

©2018 Bloomberg L.P.