Taeyoung Engineering & Construction, a troubled builder, has successfully garnered support from 96.1% of its creditors to proceed with a debt restructuring program, surpassing the required threshold of 75%. The main creditor, Korea Development Bank, announced on Friday that Taeyoung can now defer debt repayments until April 11, providing much-needed relief.
The debt restructuring program entails a comprehensive due diligence process to assess Taeyoung’s financial status and viability, as outlined by the Korea Development Bank. While this level of creditor support allows for the postponement of debt repayments, Taeyoung still faces the crucial task of securing its operating funds, including labour and construction costs, estimated to exceed 500 billion won ($379.8 million).
Despite the challenges, a group of creditors has urged Taeyoung to undertake substantial efforts to ensure the smooth execution of the debt restructuring program. A Taeyoung official responded by expressing the company’s commitment to implementing self-rescue measures to navigate through its liquidity crisis.
The official mentioned that Taeyoung would collaborate on implementing self-help measures to conclude the workout program promptly and efficiently. This aims to reduce potential harm to all involved parties, including subcontractors.
In the regulatory filing announcing the start of the debt workout program, creditors will commission an independent agency to conduct due diligence on Taeyoung’s financial health. The decision by creditors resulted in a sharp decline in Taeyoung’s shares during early morning trade, with a nearly 10% drop from the prior session, trading at 3,390 won as of 10:23 a.m.
Taeyoung has been grappling with a liquidity shortage, exacerbated by high interest rates and a sluggish property market. The builder’s outstanding project financing (PF) loans amount to 3.2 trillion won, contributing to concerns about real estate PF loans as a significant risk factor for South Korea’s financial sector and the overall economy.
The South Korean government has pledged to expand liquidity supply programs beyond the existing 85 trillion won level if deemed necessary to address the challenges posed by real estate PF loans.