‘This Time, the Creditors' Break’: Dunchon Jugong Construction Likely to Remain Halted This Year

Schedule Adjustments Unavoidable Including Forming New Daejudan
Unresolved Conflicts Remain in Union, Challenges to Overcome Also Present

Dunchon Jugong Reconstruction Complex, Gangdong-gu, Seoul. / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Cha Wanyong] The reconstruction schedule for the Dunchon Jugong Apartment (Olympic Park Foreon) in Gangdong-gu, Seoul, which was preparing to resume construction in October, is expected to be somewhat delayed.

This is because the main creditor group refused to extend the loan deadline, making it inevitable to reorganize a new creditor group and adjust the schedule. Industry insiders predict that the project will likely resume around February next year at the earliest.

On the 20th, according to the union and the construction business group (Hyundai Engineering & Construction, HDC Hyundai Development Company, Daewoo Engineering & Construction, Lotte Engineering & Construction), the request for a 700 billion KRW reconstruction union project loan extension was rejected by the creditor group. Accordingly, the union must fully repay the project funds borrowed from the creditor group by the maturity date on the 23rd.

The union plans to first issue Asset-Backed Short-Term Bonds (ABSTB) through securities firms for 66 days and use the proceeds to repay the loan. Afterwards, they intend to seek a new creditor group and pursue the project loan once again. The securities firms assisting with the ABSTB issuance include Kiwoom Securities, BNK Investment & Securities, SK Securities, and Bookook Securities.

Within the industry, it is expected that the union will not face significant difficulties in forming a new creditor group given the large scale of the project. Additionally, with the construction business group actively moving forward, there is analysis that the resumption of construction will proceed smoothly.

However, the timeline is expected to be somewhat extended. Due to the failure to extend the loan this time, the union has an additional schedule to form a new creditor group and secure project funds, and they also need to consolidate the still unresolved opinions among union members.

Currently, the union remains in conflict over the responsibility and burden of approximately 1 trillion KRW in additional costs expected due to the construction halt. Moreover, there are still many union members who supported the previous executive team, causing ongoing friction.

Because of this, even within the construction business group, voices are emerging that the goal of resuming construction in October is unrealistic.

A representative from the construction business group said, “Although Hyundai Engineering & Construction, the head of the business group, is running around in every possible way to resume construction in October, realistically it is not easy. Above all, the internal opinions of the union are important, but the internal strife has been so severe...” and trailed off.

In response, a Hyundai Engineering & Construction construction business group official said, “We are aware of external concerns regarding the creditor group’s refusal to extend the loan and the conflicts within the union. However, the construction business group will take all necessary measures so that construction can proceed immediately once approval is obtained at the October general meeting.”