824 Households Worried Over Nammyung Construction Bankruptcy... Gimhae City Actively Supports Early Sales with Dedicated Team

Amid concerns over the loss of rental deposits among tenants of public rental apartments in Mugye-dong, Jangyu, Gimhae City, following the bankruptcy of Nammyung Construction, a mid-sized construction company in Gyeongnam Province, Gimhae City has announced measures to address the issue.

On the 13th, Gimhae City stated that it will ensure no financial damage occurs to the tenants of Nammyung The Row rental apartments in Mugye-dong.

Aerial view of Nammyung The Rau in Mugae-dong, Jangyu, Gimhae-si, Gyeongnam. [Source: Nammyung Construction website]

According to the city, Nammyung The Row apartments in Mugye-dong are managed by Nammyung Industrial Development, a subsidiary of Nammyung Construction, which has been operating the rental business since completing construction. A total of 824 households moved in starting February 2017.

Nammyung Industrial Development filed for corporate rehabilitation proceedings at Changwon District Court on the 6th, after Nammyung Construction went bankrupt on the 1st due to failing to cover a matured promissory note worth approximately 1.24 billion KRW.

Each tenant has placed deposits of approximately 174.2 million KRW for 30-pyeong units and 146.2 million KRW for 25-pyeong units, with Housing and Urban Fund bonds amounting to about 76.2 million KRW for 30-pyeong units and 63.8 million KRW for 25-pyeong units.

When a company goes bankrupt or becomes insolvent, the fund bond bank initiates an auction process, and depending on the winning bid, repayments from the Housing and Urban Fund, distribution of rental deposits, and compensation within the limits of HUG guarantee insurance are carried out.

In this case, conversion to sale requires the consent of creditors and at least two-thirds of the tenants.

Accordingly, tenants held a public hearing on the 7th and formed an emergency countermeasure committee, demanding early conversion to sale and maintenance of tenant rights from Gimhae City and Nammyung Industrial Development.

Nammyung Industrial Development agreed with the residents' wishes and decided to proceed with early conversion to sale.

The city plans to support this by forming a dedicated response team to assist tenants.

They will establish a permanent cooperation system with the tenants' representative meeting, the Korea Housing & Urban Guarantee Corporation (the guarantor of Nammyung Industrial Development's rental deposits), and Woori Bank (the creditor of the Housing and Urban Fund bonds) to resolve issues such as early conversion to sale, preservation of rental deposits, and extension of guarantee insurance periods.

The city stated, "If the corporate rehabilitation process of Nammyung Construction Development proceeds smoothly, it will take about five months from the decision to commence rehabilitation proceedings to conversion to sale." It added, "Rental deposits due to contract expirations of existing tenants are expected to be repaid sequentially about six months later, following the court's approval of the rehabilitation plan."

Furthermore, the city emphasized, "We will do everything administratively possible without simply waiting for the court's decision to prevent tenant damages."