Shinhan Bank's 236.6 billion KRW, Kyobo Life Insurance's 74 billion KRW Confirmed as Contribution Amounts
Supplied at 8% Interest Rate... Shinhan Bank Bears Burden of Small and Medium Financial Firms
Financial Creditors' Adjustment Committee Recommends Postponement of TY Holdings' 'Joint Creditor Rights Exercise'
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 about 9 trillion won, is being decided, creating tension at Taeyoung Construction in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun jun21@
Taeyoung Construction, which is undergoing a workout (corporate financial restructuring) process, will receive new funding of 370 billion KRW for the 'Magok CP4 Block' project site where it is the contractor. Although there were significant concerns due to delays in negotiations among the project's main creditors, issues such as the allocation scale, loan interest rates, and the deferment of joint bond enforcement by TY Holdings have been resolved, making it possible to inject new funds by the end of this month.
According to financial authorities and TY Holdings on the 20th, the main creditors of the Magok CP4 project site, one of the prime projects contracted by Taeyoung Construction, have finalized the specific allocation scale for the new funding of 370 billion KRW needed to complete the construction and plan to sign an agreement on the 23rd. The creditors intend to supply the new funds to Taeyoung Construction on the 27th.
The Magok CP4 project is a real estate project financing (PF) initiative to develop a complex facility near Magok Station, consisting of 7 basement floors to 11 above-ground floors, with a total floor area of approximately 460,000 square meters. Even after Taeyoung Construction applied for workout, the project was classified as relatively sound due to the National Pension Service's conditional pre-purchase agreement worth 2.3 trillion KRW in 2021. However, more than 350 billion KRW in additional investment was required to complete the project by the end of this year.
The plan to inject new funds became visible from February and was initially aimed to be completed by the end of April, but the main creditors of the Magok CP4 project reportedly struggled to find common ground on specific loan interest rates, allocation scales, and conditions until recently.
The creditors agreed to allocate the newly injected 370 billion KRW according to the proportion of bond holdings. However, Shinhan Bank ultimately took on the burden of the smaller financial institutions. On the 27th, Shinhan Bank will contribute 236.6 billion KRW, Kyobo Life Insurance 74 billion KRW, Kookmin Bank and Korea Development Bank 24.7 billion KRW, and Industrial Bank of Korea 10 billion KRW. Although interest rates in the 7% range were once discussed, the final loan interest rate was set at 8%.
The issue of deferring joint bond enforcement against TY Holdings, which had emerged as a variable in Taeyoung Construction's workout process, was settled following recommendations from the Financial Creditors Adjustment Committee. The committee recommended a conditional three-year deferment of joint liability enforcement against TY Holdings, the major shareholder of Taeyoung Construction. However, repayment may be requested if special circumstances arise during the implementation of Taeyoung Construction's corporate improvement plan.
The variable related to the deferment of joint bond enforcement originated from claims raised by Woori Bank ahead of the creditors' resolution on Taeyoung Construction's corporate improvement plan in April. Woori Bank argued that TY Holdings and Taeyoung Construction are separate companies, and thus deferring joint bond enforcement against TY Holdings for three years was unreasonable, requesting the exclusion of this agenda item.
A creditor representative explained, "The Magok project was able to reach an agreement among the main creditors as Shinhan Bank agreed to bear the burden of smaller financial institutions," adding, "With the recent confirmation of the real estate PF policy direction announced by financial authorities and the adjustment committee's recommendation, other projects are expected to accelerate their negotiation processes as well."
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