Taeyoung’s fresh measures raise hope for debt workout

Taeyoung Group, South Korea’s midsize conglomerate controlling logistics, media and construction businesses, on Tuesday vowed to offer up its stakes in the group’s holding company and lucrative terrestrial TV station to rescue its debt-struck construction unit tilting toward bankruptcy.

The group announced new rescue plans amid mounting pressure on the conglomerate’s owner family criticized for its reluctance to sacrifice while demanding creditors’ support for Taeyoung Engineering & Construction Co.'s (Taeyoung E&C) debt restructuring.

“We will go all out to normalize Taeyoung E&C to minimize damages to its creditors, contractors and home buyers and to prevent any shock to the national economy,” said Taeyoung Group founder and Honorary Chairman Yoon Se-young said at a televised press conference on Tuesday.

“We will put shares of holding company TY Holdings and subsidiary SBS up as collateral if needed.”

The founder also vowed to inject additional funds into Taeyoung E&C, Korea’s 16th-largest builder, by selling other affiliates or offering them as collateral.

SBS is Seoul Broadcasting System, the group’s cash cow terrestrial TV station.

Its subsidiary SBS Medianet is floated as another affiliate to be put up for sale to save Taeyoung E&C. Its value is estimated at up to 300 billion won ($228 million).  

HOPE RISES FOR TAEYOUNG E&C'S DEBT WORKOUT 

A day earlier, Taeyoung also injected the remaining 89 billion won of the total proceeds worth 154.9 billion won from the sale of Taeyoung Industry Corp. to KKR & Co. Inc. into Taeyoung E&C.

On the same day, its board of directors approved the initial self-rescue measures to sell its stakes in Ecorbit Co., its 50:50 joint venture with KKR, BlueOne and Pyeong Taek Silo Co. (PTSilo), a farm product warehouse company, or put them as collateral.

The midsize business group has come under fire for breaching the previous pledge announced late last month to give the funds from the sale of Taeyoung Industry to Taeyoung E&C and hesitating to give up owner family members’ stakes or lucrative businesses to raise capital for the ailing construction unit.

The Korean financial authorities and presidential office gave Taeyoung an ultimatum, demanding it come up with new, sincere self-rescue plans or let go of the builder.

In late December, debt-strapped Taeyoung E&C filed for debt workout with its main creditor and state-run bank Korea Development Bank (KDB) after its lenders refused to roll over 48 billion won debts due on Dec. 28.

As Taeyoung has finally accepted the demands of Taeyoung E&C creditors, the builder’s debt restructuring plan is expected to gain traction.

The builder’s about 400 creditors will vote on Taeyoung E&C’s debt restructuring program on Thursday.

SBS IS NOT FOR GRAB

Honorary Chairman Yoon and his family members together hold 33.7% stakes in Taeyoung Group’s holding company TY Holdings Co., which also owns a 27.8% stake in Taeyoung E&C, a 38.1% in SBS and a 95.3% in SBS Medianet.

The market capitalization of TY Holdings and SBS were 236.8 billion won and 542.6 billion won, respectively, based on their closing stock prices on Tuesday.

Taeyoung got the nod from the financial authorities for putting SBS shares as collateral but is not considering the sale of one of Korea’s major three terrestrial TV stations, the group said.

Instead, it will review an option to sell other affiliates, such as SBS Medianet, which operates various cable TV channels such as SBS Biz and SBS Sports.

SBS Medianet’s total assets stood at 275.3 billion won as of the end of 2023 with an operating profit of 12.5 billion won on a 167.4 billion won revenue. Its value is estimated at more than 200 billion won.

DOUBTS REMAIN 

The creditors welcomed Taeyoung’s latest move but they said they will keep an eye on whether the company will carry out those measures without delay or failure.

The main creditor KDB will meet other lenders including KB Kookmin Bank, NongHyup Bank, Shinhan Bank, Woori Bank, Hana Bank and state-run Industrial Bank of Korea on Wednesday to review Taeyoung’s fresh self-rescue measures.

Taeyoung E&C’s debt workout needs more than 75% of votes based on the total debt amount to pass on Thursday.

Once its debt restructuring plan gets the green light, the creditor group will carry out due diligence for three months to check the possibility of the builder’s business normalization and come up with a plan to revive its business.

The creditors plan to sign a binding contract for the builder’s debt restructuring on April 11 after the due diligence.  

But some creditors are voicing concerns about Taeyoung’s new measures, saying the group could change its mind at any time.

“We will immediately stop (the builder’s) debt restructuring if Taeyoung Group fails to carry out at least one of its pledges,” said a KDB official, adding that the creditors will also suspend restructuring if it discovers additional, massive losses during the builder’s due diligence.

As of the end of November last year, Taeyoung E&C owed about 1.7 trillion won to lenders, including mutual savings banks, in addition to 3.9 trillion won of debt it has guaranteed for contractors.

Of the total, 395.6 billion won matured last month, followed by 436.1 billion won due in the first quarter of this year.

Write to In-Hyeok Lee, Hyun-Woo Kang and Jun-Ho Cha at twopeople@hankyung.com

Sookyung Seo edited this article.