A company involved in South Korea's largest-ever urban development project failed to pay back debts worth 5.9 billion won ($5.3 million), company officials said Wednesday, raising concerns over the collapse of the 30-trillion-won project.

Yongsan Development Co., the asset manager of Dreamhub Project Financing Vehicle Co. which was created for the development project, was required to pay the debts of an interest of asset-backed commercial papers worth about 200 billion won, by 9 a.m. Wednesday, said officials from Yongsan Development.

"It is true that we defaulted, though I am not for sure whether the project will completely collapse," an official of Yongsan Development said.

The default comes as Korea Railroad Corp. (KORAIL) and Lotte Tour, the two major shareholders of the consortium named Dreamhub, failed to work out differences with Daehan Real Estate Investment Trust Co. on payment guarantees of 25.7 billion won.

This could jeopardize the massive development project that calls for the construction of an 111-story skyscraper, high-rise commercial buildings, apartments, luxury hotels and a shopping complex in Yongsan, located in the heart of Seoul.

The project was aimed at transforming Yongsan into an international business hub by 2016, but it has been marred by a funding dispute and a prolonged slump in the local property market following the 2008 global financial crisis.

Meanwhile, the Ministry of Land, Transport and Maritime Affairs said the default did not mean that Dreamhub will immediately go bankrupt, adding that a Seoul court is likely to decide the fate of Dreamhub next month.

Still, the ministry renewed its position that the government cannot directly intervene in the development project.

The massive project is commissioned and managed by Yongsan Development, and the investors include KORAIL, SH Corporation, Samsung C&T, a construction arm of Samsung Group, Lotte Tour and three other investors, according to Dreamhub Project Financing Vehicle.

Samsung C&T pulled out of the project in 2010 following a dispute with KORAIL. (Yonhap News)