Mid-sized Construction Firms Face Chain Bankruptcies... Ihwa Gongyeong Files for Corporate Rehabilitation

Ehwa Construction, a mid-sized construction company with over 70 years of experience, has filed for corporate rehabilitation with the court. It was once known as an 'Lee Myung-bak theme stock' during the 2007 presidential election, causing its stock price to soar. Cases of small and mid-sized construction companies going bankrupt are increasing due to the downturn in the construction market.

According to the Financial Supervisory Service's electronic disclosure on the 2nd, Ehwa Construction held a board meeting the previous day and applied to the Seoul Rehabilitation Court for the commencement of rehabilitation procedures and preservation of company assets. As the rehabilitation process began, trading of its shares was also suspended.

The company stated regarding its 2024 financial statements that the audit opinion was rejected due to "uncertainty about the company's ability to continue as a going concern." This is grounds for delisting from the Korea Exchange. The KOSDAQ Market Headquarters announced that if no objections are raised by the 23rd, it will proceed with the delisting process for Ehwa Construction.

Ehwa Construction, established in 1956, is a comprehensive construction company ranked 134th in construction capability evaluation last year among mid-sized construction firms. In May last year, it secured a contract for the construction of the Sejong headquarters building for Rainbow Robotics, an investment by Samsung Electronics.

However, its recent business performance has continuously deteriorated. Last year's operating loss was 41.4 billion KRW, nearly 40 times the previous year's loss of 1.1 billion KRW. Although a 7 billion KRW paid-in capital increase was conducted in December last year, it appears to have been insufficient to overcome the management difficulties.

Meanwhile, the construction industry is experiencing a downturn due to high interest rates, rising construction costs, and a slump in the construction and real estate markets. Following Shindongah Construction in January, mid-sized and small construction companies such as Sambu Construction, Daejeo Construction, Jeil Construction, Angang Construction, and Daewoo Shipbuilding & Marine Engineering Construction have recently filed for corporate rehabilitation.