San: "Taeyoung Construction, Major Shareholder 100-to-1 Capital Reduction... 100% Conversion of Held Bonds to Equity"

On the 16th, the Korea Development Bank (KDB) announced regarding the workout (corporate governance improvement) of Taeyoung Construction, "The major shareholder including affiliates (TY Holdings) will implement a differential capital reduction at a ratio of 100:1, and other shareholders at a ratio of 2:1 to fulfill management responsibilities."

[Image source=Yonhap News]

On the afternoon of the 16th, KDB held an operations committee meeting (consisting of 18 financial institutions) to discuss the due diligence results and the corporate improvement plan, stating, "The due diligence firm estimated that a capital conversion of around 1 trillion KRW is necessary to fundamentally resolve the complete capital erosion."

At the operations committee meeting, based on the estimated results of profit and loss, financial status, and liquidity including the handling plan for Taeyoung Construction’s project financing (PF) sites, discussions were held on financial structure improvement measures such as capital reduction and capital conversion, as well as future normalization promotion plans. The corporate improvement plan includes capital expansion and new credit provision measures to promote the normalization of Taeyoung Construction’s management.

During the meeting, KDB conveyed that the due diligence firm estimated that a capital conversion of about 1 trillion KRW is necessary to fundamentally resolve the complete capital erosion. Accordingly, KDB plans to implement differential capital reductions for major shareholders and other shareholders, while converting 100% of existing claims such as loans held by major shareholders and 50% of unsecured financial claims into equity to dramatically improve the financial structure.

KDB stated, "Major shareholders will fulfill their responsibility for normalization by investing all held claims into capital expansion, minimizing losses for financial creditors and other stakeholders," and added, "Financial creditors will continue to support new funds and new guarantees approved at the second council meeting to support Taeyoung Construction’s business activities."

Meanwhile, KDB plans to submit the corporate improvement plan to the financial creditors’ council after the operations committee meeting held on the same day and the general creditors’ briefing session scheduled for the 18th.