Financial majors have positive view of Taeyoung rescue plan

Taeyoung Group founding chairman Yoon Se-young and group chairman Yoon Suk-min are entering a press conference on workout. [Photo by Yonhap]

South Korea’s major financial institutions, including commercial banks, positively evaluated Taeyoung Group’s self-rescue plan for Taeyoung Engineering & Construction Co. on Wednesday. The cash strapped company applied for a debt workout due to its non-performing real estate project financing (PF) loans.

“We fully understand the details of the self-rescue plan and responsibility implementation measures submitted by Taeyoung Group, and agree that if these measures are implemented, it will facilitate the initiation of the workout, due diligence, and the establishment of a corporate improvement plan,” the creditors said in a statement after a meeting convened by state-run lender Korea Development Bank (KDB), Taeyoung E&C’s main creditor, on the same day.

“If the workout for Taeyoung E&C proceeds smoothly, it will minimize losses and damages to many stakeholders, including subcontractors, pre-sale customers, and creditors,” the creditors, who also include commercial banks such as KB Kookmin Bank, the Korean Federation of Community Credit Cooperatives, and the National Agricultural Cooperative Federation, added.

“The workout process can be halted if the self-rescue plans promised by Taeyoung Group are not followed or if significant additional non-performing loans are discovered during due diligence.”

The workout for the mid-tier builder will commence if it receives approval from 75 percent of the creditors at the first creditors’ meeting scheduled for Thursday.

Around 33 percent of Taeyoung E&C’s debts are from large financial institutions, including affiliates of major financial holding companies, with KDB, the main creditor, accounting for about 3.3 percent. This means that smaller financial institutions, accounting for the remaining 67 percent of the company’s debt, hold the key to initiating the company’s workout.

Taeyoung proposed a self-rescue plan on January 3, 2024, including injecting 154.9 billion won ($117.49 million) from Taeyoung Industry Corp. sales proceeds, promoting the sale of shares in ECORBIT Co. and Pyeongtaek Silo Co., and providing collateral for and promoting the sale of its stake in BlueOne Resort Co. The company also announced additional measures on Tuesday, including providing collateral for its stakes in TY Holdings Co. (25.9 percent), Taeyoung E&C’s holding company, and Seoul Broadcasting System (SBS) (30 percent) if necessary, and refinancing using shares in SBS Medianet (95.3 percent) and DMC Media (54.1 percent).

When applying for the workout in December 2023, TY Holdings, Taeyoung Group founding chairman Yoon Se-young, and group chairman Yoon Suk-min also agreed to relinquish management rights and to delegate voting rights, reduce capital, and dispose of shares in Taeyoung E&C.

For its part, the Ministry of Land, Infrastructure and Transport announced measures in response to concerns about a chain of non-performing PF loans and a funding crunch in the construction industry in the aftermath of the Taeyoung E&C workout. “We will provide 25 trillion won in PF loan guarantees to ensure smooth financing for normal businesses,” an official from the ministry said. The ministry also plans to alleviate the liquidity crunch caused by a contraction in the PF market.