Taeyoung becomes 1st Korean builder in debt workout in decade

The vast majority of creditors to Taeyoung Engineering & Construction Co. (Taeyoung E&C) have agreed to start debt restructuring for the troubled builder, its main lender Korea Development Bank (KDB) said on Friday, marking the first debt workout for a South Korean construction company in a decade.

The state-run bank said that 96.1% of about 600 creditors had approved the proposed debt workout for the country’s 16th-largest construction company by the Thursday deadline.

They will freeze the repayment and interest on Taeyoung’s debts until April 11, while reviewing its assets and liabilities through due diligence.

Their agreement followed a new round of self-rescue measures proposed by its parent Taeyoung Group and owner family early this week, under mounting pressure from its creditors and government authorities to make sacrifices to keep the building arm afloat.

Taeyoung Group on Tuesday vowed to offer up its stakes in the group’s holding company TY Holdings Co. and the lucrative terrestrial TV station SBS.

“If we judge there is a high likelihood of Taeyoung E&C getting back to normal and its stakeholders and Taeyoung Group are dedicated to their self-rescue plans, we will set up its restructuring plan and proceed with it,” KDB said.

The restructuring program will likely include details on debt rescheduling and new capital injection on conditions of Taeyoung Group’s painstaking self-rehabilitation efforts, to shoulder any losses to be incurred during the workout process between creditors and the conglomerate.

“If the owner family fails to carry out even one of the self-rescue plans it had promised, we will immediately stop the workout process,” said a creditor bank official.

Late last month, Taeyoung Group filed for a debt workout for Taeyoung E&C to avoid bankruptcy.

Its debt workout application highlighted the liquidity crunch in the construction sector struggling with high financing costs and stalled building projects amid the economic slowdown.

Back in 2013, Ssangyong Engineering & Construction Co. filed for debt workout and won creditors’ approval. Since then, Taeyoung E&C has become the first company under a debt rescheduling scheme in the country.

Many domestic builders had taken responsibility for the entire process of construction projects from land purchase to development and construction through debt guarantees to better compete in the real estate boom.

With 2.7 trillion won ($2 billion) in assets, Taeyoung E&C has guaranteed the payment of a whopping 9.5 trillion won ($7.2 billion) in debts owed by its contractors as of the end of last year.

Write to Hyun-Woo Kang, Jong-Kwan Park and In-Hyeok Lee at hkang@hankyung.com
 

Yeonhee Kim edited this article.