Taeyoung Construction Establishes 'Corporate Improvement Plan'... Creditors' Briefing on the 16th

San-eun Holds Briefing and Discussion with 18 Main Creditors
April Improvement Plan 'Creditors' Resolution' to be Completed... Agreement Signing in May
Financial Authorities Gauge Direction for 'Real Estate PF Normalization Plan'

On the 10th, a creditors' meeting of Taeyoung Construction was held at the headquarters of the Korea Development Bank in Yeouido, Seoul. Photo by Huh Younghan younghan@

The corporate improvement plan of Taeyoung Construction, which is undergoing a workout (corporate financial restructuring) process, is expected to take shape through a creditors' briefing session. The Industrial Bank of Korea (IBK), the main creditor bank, plans to finalize the creditors' resolution on the corporate improvement plan within April. Attention is focused on whether the Taeyoung Construction corporate improvement plan, established after various twists and turns, can proceed to procedures such as agreement signing and commencement of joint management in May.

According to financial circles on the 15th, IBK plans to hold a briefing session on the 16th afternoon for 18 major creditors regarding the establishment of the corporate improvement plan. Having outlined the corporate improvement plan based on due diligence of 59 real estate project financing (PF) sites and Taeyoung Construction’s asset and liability due diligence, it is interpreted as a determination to accelerate the delayed 'resolution' process through discussions with the main creditors.

A main creditor bank official said, "As concerns have been growing due to continuous rumors of a real estate PF crisis, it seems aimed at concluding the workout process for Taeyoung Construction. I understand the goal is to sign an agreement related to the corporate improvement plan and enter the joint management procedure within May."

IBK had planned to complete the financial creditors' resolution on the corporate improvement plan on April 11, three months after initiating the workout in January. However, due to delays in submitting normalization plans for each PF site and repeated requests from Taeyoung Construction’s audit firms for additional analysis time, the deadline was extended by up to one month.

The corporate improvement plan to be established this time will include PF site handling measures, financial restructuring plans such as debt adjustment of main and guaranteed creditors, liquidity procurement plans, and company management and operational plans.

The fate of each PF site will differ based on the due diligence results. Among the 59 sites, those where projects will continue and those to be transferred to construction company replacement or auction procedures will be determined. The direction of the 'Real Estate PF Normalization Plan' to be announced soon by financial authorities is also likely to be significantly reflected.

Financial authorities plan to prepare measures to induce projects currently enduring by extending loan maturities with the goal of restructuring PF sites to proceed to auction or foreclosure. One likely measure under consideration is subdividing the business viability assessment criteria from three stages?'Good (normal in asset soundness classification) - Watch (caution) - Deterioration Concern (substandard or below)'?to four stages: 'Good - Watch - Deterioration Concern - Doubtful Recovery.' If the criteria are subdivided, the minimum loan loss provision rates per site will be classified as normal (2%), watch (10%), substandard (30%), and doubtful recovery (75%), increasing the burden of maintaining non-performing sites.

On the 11th, the fate of Taeyoung Construction, which applied for a workout (corporate restructuring) after failing to repay real estate project financing (PF) loans worth around 9 trillion won, is being decided, creating tension at Taeyoung Construction in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun jun21@

The ratio of the major shareholder’s free capital reduction to resolve complete capital erosion and the scale of creditors’ equity conversion are also points of focus. Taeyoung Construction’s stock trading has been suspended due to complete capital erosion. Since major shareholder capital reduction is a procedure that workout companies have gone through in the past, it is an unavoidable step. Additionally, with Taeyoung Construction’s total capital at -635.6 billion KRW, decisions on equity conversion by creditors and major shareholders are necessary to escape the state of complete capital erosion.

The company’s management plan and operational management for the joint management procedure are also areas of interest. Industry attention is high regarding the extent to which broad management plans covering decision-making structures, business restructuring, and asset sales will be included. A representative from a major construction company explained, "Since financial authorities have repeatedly emphasized a smooth landing of the PF market by meeting with the construction industry and financial companies, the contents of Taeyoung Construction’s corporate improvement plan will be an important barometer."