Debt-ridden Taeyoung E&C applies for restructuring program

Taeyoung E&C’s Office Building in Yeouido, Seoul. [Photo by Kim Ho-young]

South Korea’s mid-tier builder Taeyoung Engineering & Construction Co. on Thursday applied for a debt workout amid fears over liquidity shortage sparked by troubled real estate project financing (PF) deals.

“Taeyoung E&C filed for a workout today morning,” said a financial industry official on Thursday.

The workout, operating under the Corporate Restructuring Promotion Act, enables the normalization of financially distressed companies by restructuring debt and providing fresh funds when over 75 percent of creditors agree to such support.

The application by the country’s 16th-largest builder in terms of construction capacity is expected to bring ripple effects in the overall construction industry due to real estate PF loans.

Taeyoung E&C, which has been facing deepening liquidity issues, is known to have applied for a workout due to issues with the maturity of real estate PF loans

Creditors of Taeyoung E&C are reportedly leaning toward collecting their PF loans for an office building project in Seongsu-dong in Seongdong District in Seoul rather than extending the loan maturity as the builder’s fundamental liquidity improvement remains challenging.

Key creditors for the project include KB Securities, NH NongHyup Capital and Kiwoom Savings Bank.

The deadline for the PF loans worth 48 billion won ($37.1 million) is Thursday.

The government is taking active measures to contain the fallout of the situation from spreading to other financial and construction companies. Policies aimed at supporting Taeyoung E&C suppliers are expected to be announced shortly.

The balance of PF loans guaranteed by Taeyoung E&C surged to 4.41 trillion won as of the end of September this year from 3.35 trillion won at the end of 2021. The net real estate PF balance, excluding government-guaranteed SOC projects, stands at 3.2 trillion won.

Although financial authorities do not anticipate a construction company on the scale of Taeyoung E&C to face a comparable crisis, they are closely monitoring the market in light of the situation.