Taeyoung Construction Workout... Government "Refunds Possible for 14 Pre-Sold Sites if Needed"

60 PF Sites..Partial Contractor Replacement
14 of 22 Sold Sites Enrolled in Sales Guarantee
HUG Refunds Sales Payments if Needed
Payment Deferral for Partner Companies' Financial Debt Also Available

On the 28th, as Taeyoung Construction filed for workout, the government also announced plans to promote protection measures for project financing (PF) sites, pre-sale buyers, and partner companies.

On the same day, the government and the Financial Supervisory Service held a joint briefing with related ministries and announced countermeasures based on the status of Taeyoung Construction's PF sites and pre-sale buyers.

Kim Ju-hyun, Chairman of the Financial Services Commission (second from the left), is briefing on the response measures related to Taeyoung Construction's workout application at the Government Seoul Office Annex on the morning of the 28th.
[Photo by Yonhap News]

The government decided to implement protection measures for sites related to Taeyoung Construction, pre-sale contract holders, and partner companies. To protect pre-sale contract holders, the Housing and Urban Guarantee Corporation (HUG) will either refund pre-sale payments or take over the sites to continue construction.

Kim Joo-hyun, Chairman of the Financial Services Commission, stated, "We will immediately implement protection measures for pre-sale contract holders and partner companies, and in preparation for the possibility of increased market volatility due to anxiety, we will promptly activate the already prepared market stabilization measures. Depending on the market situation, we will significantly expand and strengthen the scale and content of these measures."

As of the end of September, there are 60 PF sites related to Taeyoung Construction. The government plans to either proceed with or wind down projects based on their viability and construction progress. For 18 sites at the bridge loan stage, where land has been purchased but permits have not been granted, the government will discuss handling measures such as whether to continue construction through the creditor group agreement or replace the construction company.

Overview of PF Project Sites Involving Taeyoung Construction (Data Provided by Financial Services Commission)

Among the sites under construction by Taeyoung Construction, there are a total of 22 sites with pre-sale contract holders, comprising 19,869 households. Of these, 14 sites (12,395 households) are covered by HUG's pre-sale guarantee, allowing for either move-in or refund of pre-sale payments. For these 14 sites, Taeyoung Construction will continue construction, but if necessary, the construction company may be replaced to fulfill pre-sales and support move-ins.

Kwon Dae-young, Standing Commissioner of the Financial Services Commission, explained, "For sites with low construction progress, refunds can be executed, and for the 14 sites, mechanisms are in place to ensure safe move-in or refund of pre-sale payments."

For six sites (6,493 households) managed by the Korea Land and Housing Corporation (LH) and others, Taeyoung Construction will basically carry out construction, but if necessary, joint subcontractors will proceed with the project or alternative contractors will be selected. The remaining two sites are managed by trust companies or regional housing association guarantees. For these sites, stakeholders need to discuss whether to continue construction or replace the contractor, and discussions are expected to be led by the Ministry of Land, Infrastructure and Transport.

On the 28th, Taeyoung Construction, which is experiencing a liquidity crisis due to real estate project financing (PF), applied for a workout (corporate restructuring). The entrance of Taeyoung Construction headquarters in Yeongdeungpo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Taeyoung Construction is currently undertaking a total of 140 construction projects. Taeyoung Construction or joint contractors will carry out the work. If execution is difficult, trust companies or guarantee institutions may select alternative contractors to complete the construction.

Measures will also be taken to extend loan maturities or reduce interest rates to prevent significant impact on partner companies with large transaction volumes with Taeyoung Construction. There are 581 partner companies and 1,096 projects. Of these, 96% (1,057 projects) have subcontract payment guarantees through the Construction Guarantee Association or direct payment agreements with the client. Subcontractors whose sales revenue is more than 30% related to Taeyoung Construction will be supported with a one-year debt repayment deferral or interest rate reduction.

Regarding the number of subcontractors affected by the workout application and the scale of debt extension, Commissioner Kwon estimated "about 158" and said, "Partner companies are all subcontractors, likely small companies such as landscaping and interior firms, and we will establish a support center at the Financial Supervisory Service."

Commissioner Kwon added, "The Financial Supervisory Service will take the lead in actively recommending loan maturity extensions to financial institutions, and I believe the financial sector will cooperate in this area. We will support difficult subcontractors with debt restructuring through a fast-track process."

For Taeyoung Construction's workout to commence, approval from more than 75% of creditors is required. Once the workout is applied for, financial creditors will be convened within 14 days for the first consultation meeting resolution. The main creditor bank will conduct due diligence and prepare a corporate improvement plan. Subsequently, procedures to approve the corporate improvement plan will follow. The government plans to additionally prepare a 'Comprehensive Support Plan for the Construction Industry.'

On this day, financial authorities emphasized that they aim to smoothly stabilize real estate PF through Taeyoung Construction's self-help efforts and creditor agreements. Unlike other construction companies, Taeyoung Construction has unique factors such as a high proportion of self-developed projects, a debt ratio of 258%, and PF guarantee amounts reaching 3.7 trillion won.

Commissioner Kwon explained, "From 2016, there was a real estate boom for 5 to 6 years, and construction companies accumulated considerable strength during that time. They are enduring difficult times with that strength, and it is a battle against time. Although Taeyoung Construction ranks quite high in contract rankings, it is not a very large company in the overall financial system."

He continued, "They overcame the Legoland crisis and last year's crisis as well. If coordination is based on common sense, the market instability and spillover to construction companies can be sufficiently blocked with the strength, means, and willpower they have."

This content was produced with the assistance of AI translation services.