Examining Taeyoung's Claim on "Implementation of Self-Rescue Plan"... Authorities Suspect "Major Shareholder Fund Parking"

Taeyoung "Completed Full Support of Sale Proceeds for Taeyoung Industries... Owner Family Contributed 48.4 Billion KRW of Private Funds" Announcement
Part of Sale Proceeds Used to Resolve TY Holdings' Joint Debt
Criticism That Additional Owner Family Private Contribution Is Only About 6.8 Billion KRW
Lee Bok-hyun, Financial Supervisory Service Chief, Strongly Criticizes "Suspicion of Major Shareholder Family's Fund Parking"

Taeyoung Construction, which applied for a workout due to liquidity issues in real estate project financing (PF), has completed a creditors' briefing session. On the 4th, the traffic light in front of Taeyoung Construction's headquarters in Yeouido, Seoul, turned red. Yoon Se-young, the founding chairman of Taeyoung Group, acknowledged management's mistakes during the briefing and requested consent for the workout, but the main creditor bank, the Korea Development Bank, asked for an additional self-rescue plan. Photo by Kang Jin-hyung aymsdream@

Taeyoung Group announced that it has implemented some of the self-rescue measures promised to the creditors of Taeyoung Construction, but the level of implementation is considered insufficient to restore the already damaged trust. The details of the owner's family’s private fund contributions, which some creditors strongly demanded, rather raised doubts about the sincerity of the workout.

According to Taeyoung Group and the creditors on the 5th, Taeyoung Group stated that it fulfilled its promise by supporting Taeyoung Construction with the entire 154.9 billion KRW from the sale proceeds of Taeyoung Industry the previous day. Taeyoung Group explained that 40 billion KRW of the sale proceeds was used to pay subcontractors immediately after the workout application, 89 billion KRW was used to repay retail bonds among the joint debts of the holding company TY Holdings, and the remaining 25.9 billion KRW was injected as operating funds for construction sites on the 3rd, the day of the creditors’ briefing.

The initial self-rescue plan promised by Taeyoung Group to the main creditor bank, KDB Industrial Bank, included ▲supporting Taeyoung Construction with 154.9 billion KRW from the sale proceeds of Taeyoung Industry ▲selling 50% of the shares of the affiliate comprehensive environmental company Ecobit and supporting Taeyoung Construction ▲providing shares of the golf and leisure business company Blue One as collateral and promoting its sale ▲providing 62.5% of the shares of Pyeongtaek Silo as collateral.

Contrary to Taeyoung Group’s claims, the creditors hold the position that using the sale proceeds of Taeyoung Industry to resolve the joint debts linked to TY Holdings is inappropriate. Since the joint debts of TY Holdings should be resolved by TY Holdings itself, it is pointed out that this was not a decision to resolve the debt relationship solely of Taeyoung Construction, which applied for the workout (corporate restructuring process).

On the 28th, Taeyoung Construction, which is experiencing a liquidity crisis due to real estate project financing (PF), applied for a workout (corporate restructuring). The entrance of Taeyoung Construction headquarters in Yeongdeungpo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Questions are also being raised about the 48.4 billion KRW that the owner’s family reportedly contributed from their private funds. Taeyoung Group explained that Chairman Yoon Seok-min of Taeyoung Group supported Taeyoung Construction with the entire 41.6 billion KRW from the sale of his shares in Taeyoung Industry (after deducting capital gains tax) and separately invested 3 billion KRW in purchasing bonds of Taeyoung Construction’s subsidiaries. Taeyoung Group also stated that Founder Chairman Yoon Se-young, who returned to Taeyoung Group’s management, invested 3.8 billion KRW in purchasing bonds of Taeyoung Construction and its subsidiaries.

However, excluding the 41.6 billion KRW generated from the sale of Taeyoung Industry, it is pointed out that the actual newly contributed private funds amount to only 6.8 billion KRW. The creditors understand the owner family’s private fund contributions as a separate confirmation of the sincerity of the workout procedure apart from the four self-rescue plans. This indicates a significant gap between Taeyoung Group and the creditors. Moreover, the 51.3 billion KRW acquired by Yoon Jae-yeon, daughter of Founder Chairman Yoon, from the sale proceeds of Taeyoung Industry is missing. Regarding this, Lee Bok-hyun, Governor of the Financial Supervisory Service, raised doubts about trust at a New Year press conference on the 4th, saying, "There is suspicion that the major shareholder family’s funds might be parked."

The deadline for submitting a high-intensity self-rescue plan to start the workout is widely expected to be by this weekend. There is a possibility that the 'F4' meeting, a high-level consultative body of financial authorities, will be held this weekend, and the Financial Supervisory Service Governor strongly pressured that an improved self-rescue plan should be presented by then.

The Industrial Bank also plans to finalize the creditor group that will form the creditors’ council soon and hold additional discussions. An Industrial Bank official explained, "We will receive Taeyoung Construction bond reports from each creditor, conduct internal verification procedures, and finalize the creditors," adding, "We do not yet know the scale, but we are pursuing the option of holding additional meetings."