Samil Construction Files for Rehabilitation... Direct Hit from HUG Guarantee

Collateral Requirements for Guarantees Exceed Acceptable Limits

Court.

Samil Construction Co., Ltd., a leading mid-sized construction company in the Gwangju and Jeonnam regions, along with its affiliate, has filed for court receivership (rehabilitation proceedings) to defend against a liquidity crisis.

According to the legal community on January 14, the 1st Bankruptcy Division of the Gwangju District Court (Presiding Judge Yoo Seokdong) issued a comprehensive stay order for Samil Construction and its affiliate Paraview Golden Class Co., Ltd., which filed for rehabilitation on January 6 and 8, respectively.

Once a comprehensive stay order is issued, creditors are prohibited from enforcing claims until the court decides whether to commence rehabilitation proceedings, and the debtor is not allowed to dispose of assets at their discretion. Currently, there are reportedly 64 creditors associated with Samil Construction, including corporate entities such as the Construction Guarantee Cooperative.

Samil Construction, established in 1995, is a comprehensive construction company that ranked 111th in last year's Ministry of Land, Infrastructure and Transport construction capability evaluation, making it a key player in the region. With its housing brand 'Samil Paraview,' the company has carried out nationwide sales and rental housing projects.

The company stated that there are currently no unpaid or overdue construction payments. However, it claims that the recent change in the appraisal system by the Housing and Urban Guarantee Corporation (HUG) forced it to make this unavoidable decision in order to manage risk. HUG has significantly tightened the criteria for recognized appraisal values when joining its guarantee program, resulting in collateral requirements for rental deposit guarantees that exceed the company's capacity.

A representative from Samil Construction explained, "As the collateral requirements for rental guarantees on approximately 4,600 units nationwide have surged, even Samil Construction, which participated in joint guarantees, could be put at risk," adding, "We preemptively applied for court receivership before HUG's guarantee processing or asset seizures could proceed."

The court plans to hold a hearing with the management of Samil Construction and Paraview Golden Class on the afternoon of January 26, after which it will make a final decision on whether to initiate rehabilitation proceedings.