Approval of Taeyoung Construction Corporate Improvement Plan... Over 75% Consent from Creditors

The creditor group of Taeyoung Construction, which is undergoing a workout (corporate financial restructuring) process, has approved a corporate improvement plan centered on a 100-to-1 capital reduction for the major shareholder and a capital increase of approximately 1 trillion won.

Taeyoung Construction, which applied for a workout (corporate restructuring) after failing to repay real estate project financing (PF) loans worth around 9 trillion won. Photo shows Taeyoung Construction in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun. jun21@

Taeyoung Construction's main creditor bank, Korea Development Bank, announced on the 30th at 6 p.m. that the corporate improvement plan agenda submitted to the 3rd Financial Creditors' Council met the approval requirement with more than 75% of the creditor group's consent.

The corporate improvement plan includes reducing the major shareholder's old shares by 100 to 1, converting 100% of the pre-workout loans amounting to 400 billion won into equity, and converting 100% of the post-workout loans amounting to 334.9 billion won into perpetual bonds. Financial creditors will convert 50% (239.5 billion won) of unsecured bonds into equity, and for the remaining 50%, repayment will be deferred for three years with a reduced interest rate of 3%.

Recently, one of the main creditor banks, Woori Bank (with a voting right of 1.1%), raised an objection to the agenda item to "defer the joint debt claim on TY Holdings for three years," but the majority of the creditor group judged that deferring TY Holdings' joint debt was appropriate. Woori Bank applied to the Financial Creditors' Adjustment Committee, the creditor group's consultation body, to exclude the agenda item. The Adjustment Committee is expected to make a decision on Woori Bank's objection by mid-next month. If the Adjustment Committee sides with Woori Bank, the agenda item will become invalid.

Following this approval, Taeyoung Construction and the creditor group plan to implement the corporate improvement plan and the project financing (PF) site handling measures. Korea Development Bank expressed expectations that "by swiftly executing a capital increase plan that can resolve capital erosion and enable the resumption of transactions, financial soundness will be secured to allow normal order-taking activities after 2025." The bank also expects that if the PF sites under normal construction proceed as planned, stable liquidity can be secured by the end of 2025 through the collection of construction payments.

Korea Development Bank stated, "An effective and executable corporate improvement plan has been prepared within four months since Taeyoung Construction applied for workout," and added, "It is evaluated that a foundation has been laid to minimize losses for all stakeholders and stabilize the PF financial market." Based on the site handling measures submitted by the PF major creditor group, the bank classified 32 of the 40 PF sites as completed or proceeding normally, 7 sites for contractor replacement, and 1 site for liquidation. Among 20 bridge loans, 1 site will continue the project as is. Of the remaining 19, 10 sites are classified for contractor replacement and 9 sites for project liquidation through auctions or sales.