Bondholders respond to Taeyoung's 'Implementation of Self-Rescue Plan' claim as 'Distortion to Protect Management Rights' (Comprehensive)

Taeyoung Announces "Full Support of Sale Proceeds by Taeyoung Industries... Owner Family Contributed 48.4 Billion KRW of Private Funds"
Part of Sale Proceeds Used to Resolve TY Holdings' Joint Debt
Owner Family's Additional Private Contribution Estimated at Only 6.8 Billion KRW
Lee Bok-hyun, Financial Supervisory Service Chief, Strongly Criticizes "Suspicion of Major Shareholder Family's Fund Parking"
Creditors Also Say "Protecting Management Rights... Difficult to Agree to Workout Start Under Current Conditions"

Taeyoung Group announced that it has implemented some of the self-rescue measures promised to the creditors of Taeyoung Construction, but the level of implementation is considered insufficient to restore the already damaged trust. The disclosure of the owner's family’s personal fund contributions, which some creditors strongly demanded, rather raised doubts about the sincerity of the workout.

Immediately, authorities responded with suspicions of “fund parking by the major shareholder family,” and the creditors also opposed, stating that Taeyoung Group is distorting the support for Taeyoung Construction by claiming it is supporting the holding company to maintain management rights, saying, “It will be difficult to agree to the workout under these circumstances.”

According to Taeyoung Group and the creditors on the 5th, Taeyoung Group announced that it fulfilled its promise by supporting Taeyoung Construction with the entire 154.9 billion KRW proceeds from the sale of Taeyoung Industry the previous day. Taeyoung Group explained that out of the sale proceeds, 40 billion KRW was used to pay subcontractors immediately after the workout application, 89 billion KRW was used to repay retail bonds under the joint liability debt of the holding company TY Holdings, and the remaining 25.9 billion KRW was injected as operating funds for construction sites on the day of the creditors’ briefing on the 3rd.

[Image source=Yonhap News]

The initial self-rescue plan promised by Taeyoung Group to the main creditor bank, KDB Industrial Bank, included ▲supporting Taeyoung Construction with 154.9 billion KRW from the sale of Taeyoung Industry ▲selling 50% of the shares of the affiliated comprehensive environmental company Ecobit and supporting Taeyoung Construction ▲providing shares of the golf and leisure business company Blue One as collateral and promoting its sale ▲providing 62.5% of shares of Pyeongtaek Silo as collateral.

Contrary to Taeyoung Group’s claims, the creditors hold the position that using the proceeds from the sale of Taeyoung Industry to resolve the joint liability debt linked to TY Holdings is inappropriate. Since the joint liability debt of TY Holdings is an issue that TY Holdings itself should resolve, it was not a decision to settle the debt relationship solely of Taeyoung Construction, which applied for the workout (corporate restructuring process).

Questions have also been raised about the 48.4 billion KRW that the owner family reportedly contributed from their personal funds. Taeyoung Group explained that Chairman Yoon Seok-min supported Taeyoung Construction with the entire 41.6 billion KRW from the sale of his Taeyoung Industry shares (after deducting capital gains tax) and separately invested 3 billion KRW in purchasing bonds of Taeyoung Construction’s subsidiaries. Taeyoung Group also stated that Founder Chairman Yoon Se-young, who returned to Taeyoung Group’s management, invested 3.8 billion KRW in purchasing bonds of Taeyoung Construction and its subsidiaries.

However, excluding the 41.6 billion KRW generated from the sale of Taeyoung Industry, it is pointed out that the actual newly contributed personal funds amount to only 6.8 billion KRW. The creditors understand the owner family’s personal fund contributions as a separate confirmation of the sincerity of the workout process, apart from the four self-rescue plans. This indicates a significant gap between Taeyoung Group and the creditors. Moreover, 51.3 billion KRW acquired by Yoon Jae-yeon, daughter of Founder Chairman Yoon, from the Taeyoung Industry sale proceeds is missing from the explanation. Regarding this, Lee Bok-hyun, Governor of the Financial Supervisory Service, raised doubts about trust at a New Year press conference on the 4th, saying, “There is suspicion that the major shareholder family’s funds are being parked.”

The creditors also issued a statement on the same day rebutting Taeyoung Group’s claims.

The creditors stated, “Taeyoung Group’s claims distort the use of funds for the joint guarantee debt of TY Holdings for the purpose of maintaining management rights as support for Taeyoung Construction,” and pointed out, “Repaying the joint guarantee debt with funds originally intended to support Taeyoung Construction to reduce TY Holdings’ risk is solely for the benefit of TY Holdings, not Taeyoung Construction.”

Furthermore, the creditors said, “During the due diligence and corporate improvement plan review period related to the workout, when substantial liquidity is needed for the company to operate normally, if a responsible funding plan from the major shareholder is not secured, creditors will find it very difficult to agree to the workout initiation,” and urged, “Creditors call on Taeyoung Group to immediately support 89 billion KRW to Taeyoung Construction as promised at the time of the workout application.”

Meanwhile, it is widely expected that the deadline for submitting a high-intensity self-rescue plan to initiate the workout will effectively be this weekend. There is a possibility that the high-level financial authorities’ consultative body, the ‘F4’ meeting, will be held this weekend, and the Financial Supervisory Service Governor has strongly pressured that an improved self-rescue plan must be presented by then.

KDB Industrial Bank also plans to finalize the creditor group that will form the creditor council soon and hold additional discussions. A KDB Industrial Bank official explained, “We are receiving Taeyoung Construction bond claims from each creditor and conducting internal verification procedures to finalize the creditors,” adding, “We do not yet know the scale, but we are pursuing the option of holding additional meetings.”

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