Trading of debt-ridden Taeyoung E&C suspended

Trading of Taeyoung Engineering & Construction was suspended on the Kospi after it reported a negative asset balance amid its ongoing debt restructuring program.

The main headquarters of Taeyoung Engineering & Construction [Yonhap]

Trading of the cash-strapped Taeyoung Engineering & Construction (E&C) was suspended on Thursday as the mid-sized builder reported a negative net asset balance amid its ongoing debt restructuring program.

Total assets of Korea’s 16th-largest builder stood at negative 562.6 billion won ($430 million) as of the end of last year, exceeding its total liabilities of 5.84 trillion won, according to the firm's regulatory filing on Wednesday.

Trading on the Kospi was halted at 2,310 won following the filing's release, in accordance with the Korea Exchange's Kospi market listing regulation.

Taeyoung E&C said the negative net asset balance was inevitable as it reflected the expected losses associated with its real estate project financing (PF) loans. It added that contingent liabilities from its PF businesses could be reduced during the normalization process.

The mid-sized builder applied for a debt restructuring program in December last year due to a liquidity shortage over real estate PF loans, which have emerged as a major risk factor for the country’s financial sector and the overall economy. The business has been suffering amid high interest rates and a slumping property market.

The state-run Korea Development Bank (KDB), its main creditor, said the capital impairment “is an event that can usually happen in the process of a debt restructuring program.”

The bank added, “Even if it falls into a reason for delisting, proceedings of normal debt restructuring program will not be affected.”

Taeyoung E&C can file an objection to the trading suspension. It will be given up to a year to improve its balance sheet if the objection is accepted following review. A committee from the exchange will determine whether the company should be delisted based on its plans to improve its business and compliance to those plans.

Taeyoung E&C's market capitalization is 89.9 billion won.

The next general meeting of the company's shareholders will take place on March 28.

BY JIN MIN-JI [jin.minji@joongang.co.kr]