'Workout D-4', Taeyoung-Creditors Standoff... Government and Creditors Hold Consecutive Meetings

Differences Persist Over Self-Rescue Plan Implementation
TY Holdings Joint Liability Resolution...Major Shareholder's Personal Fund Contribution Controversial
Government and Creditors Demand Stronger Self-Rescue Measures
'F4' Meeting on 7th, Additional Bank Creditors Meeting on 8th
Decision on Taeyoung Construction Workout Initiation on 11th

On the 11th, ahead of the first financial creditors' meeting to decide whether to commence the workout for Taeyoung Construction, a tense tug-of-war continues between Taeyoung Group and the government and creditors. Starting from the 'F4 (Finance 4)' meeting on the 7th, which is a gathering of financial authorities' heads, movements such as finalizing, convening, and consulting the creditors are expected to accelerate.

Since Taeyoung Construction applied for a workout, the government and creditors have been raising the level of their statements, demanding a strong revised self-help plan that can support the sincerity of the workout. Taeyoung Group insists that they have faithfully fulfilled their promises with the creditors so far and that there is no problem, but the government and creditors are increasing pressure, saying, "Present all possible measures sincerely."

At the 'F4' meeting attended by Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, Kim Ju-hyun, Chairman of the Financial Services Commission, Lee Bok-hyun, Governor of the Financial Supervisory Service, and Lee Chang-yong, Governor of the Bank of Korea, a contingency plan will be reviewed in preparation for possible scenarios such as the failure of the workout, and institution-specific countermeasures will be prepared. If the crisis spreads throughout the real estate project financing (PF) market, it cannot be ruled out that companies with many contingent liabilities, especially construction companies, will be exposed to risk.

Creditors and Taeyoung at an impasse... What are the main issues?

Taeyoung Construction, which applied for a workout due to liquidity issues in real estate project financing (PF), has completed a creditors' briefing session. On the 4th, the traffic light in front of Taeyoung Construction's headquarters in Yeouido, Seoul, turned red. Yoon Se-young, the founding chairman of Taeyoung Group, acknowledged management's mistakes during the briefing and requested consent for the workout, but the main creditor bank, the Korea Development Bank, demanded an additional self-rescue plan. Photo by Kang Jin-hyung aymsdream@

The first self-help plan presented by Taeyoung Group to the Korea Development Bank (KDB) included four measures: ▲supporting Taeyoung Construction with 154.9 billion KRW from the sale of Taeyoung Industry ▲supporting Taeyoung Construction after selling 50% of the shares of the affiliated comprehensive environmental company Ecobit ▲providing shares of the golf and leisure company Blue One as collateral and pursuing sale ▲providing 62.5% of shares of Pyeongtaek Silo as collateral.

The positions of both sides diverged from the first self-help plan regarding the support from the sale proceeds of Taeyoung Industry. On the day after KDB Chairman Kang Seok-hoon expressed deep regret at a press conference he voluntarily held following the creditors' briefing, accusing Taeyoung Group of "changing their words," Taeyoung Group announced on the 4th that they had implemented the first self-help plan related to Taeyoung Industry. They claimed that all 154.9 billion KRW from the sale of Taeyoung Industry was supported to Taeyoung Construction, and that the major shareholder family had also made personal contributions.

However, the creditors argued that the demand to support Taeyoung Construction by selling shares of the major shareholder family and the holding company was not properly fulfilled. The cash held by TY Holdings and the major shareholder family from the sale of Taeyoung Industry amounted to 113.3 billion KRW for TY Holdings, 41.6 billion KRW for Yoon Seok-min, Chairman of Taeyoung Group, and 51.3 billion KRW for Yoon Jae-yeon, Blue One CEO and Yoon's younger sister, totaling 206.2 billion KRW. Yoon Jae-yeon's share was excluded on the grounds that she has no management responsibility.

The creditors pointed out that TY Holdings lent only 65.9 billion KRW to Taeyoung Construction, and the remaining 89 billion KRW was used to resolve joint liabilities involving TY Holdings, so it cannot be considered that the self-help plan was implemented. They claimed that the sale proceeds were used mainly to maintain management rights rather than solely to support Taeyoung Construction. The creditors urged immediate support of the 'unfulfilled portion' of 89 billion KRW, stating, "Repaying joint guarantee liabilities to reduce TY Holdings' risk benefits only TY Holdings."

There is also disagreement over the method of supporting the 41.6 billion KRW from the sale proceeds of Taeyoung Industry, which Taeyoung Construction claims as a personal contribution from Chairman Yoon. As part of the 89 billion KRW 'unfulfilled portion' defined by the creditors, TY Holdings announced on the 5th that it would issue 41.6 billion KRW of hybrid capital securities to Chairman Yoon. These securities are recognized as capital in accounting terms, and the subscribers can receive interest and principal repayment at the issuer's discretion.

Accordingly, the creditors' stance is that thorough implementation of the four self-help plans and personal contributions from the major shareholder family are necessary to restore damaged trust, and that all possible measures must be presented. Measures to enhance the sincerity of the workout include utilizing SBS shares, utilizing holding company shares, and additional personal contributions from the major shareholder family.

KDB to convene additional bank creditors on the 8th... Financial Services Commission calls financial holding companies to check 'PF status'

Taeyoung Construction, which is experiencing a liquidity crisis due to real estate project financing (PF), has applied for a workout. On the 5th, the construction site of Taeyoung Construction's Seongsu-dong development project located in Seongdong-gu, Seoul, has come to a halt. Photo by Jinhyung Kang aymsdream@

On the 5th, KDB, the main creditor bank, convened an emergency meeting with the five major banks?KB Financial, Shinhan, Woori, Hana, NH Nonghyup?and IBK Industrial Bank to conduct in-depth discussions on Taeyoung Construction's insolvency, including ▲responsibility of affiliated stocks ▲contents and implementation status of the self-help plan ▲future workout promotion direction.

The bank creditors, gathered in one place, also issued an official statement emphasizing the need for a high-intensity self-help plan based on "bone-cutting self-help efforts by affiliated stocks and Taeyoung Group." The statement expressed disappointment and concern over the implementation status of the previously announced self-help plan by Taeyoung Group and included pressure that "if the existing self-help plan is not fulfilled, the workout cannot be initiated as 75% approval will not be secured."

At the meeting convened on the 8th at KDB's request, just three days after the first bank creditors' meeting, additional self-help plans to be submitted by Taeyoung Construction and key issues based on the F4 meeting results are expected to be discussed in depth. Financial authorities have effectively set a deadline, stating that a strong additional self-help plan must be submitted by this weekend to gain creditors' consent.

Separately from the bank creditors' meeting, the Financial Services Commission will hold a 'Real Estate PF Status Check Meeting' by calling PF managers from major financial holding companies. This meeting will be attended by representatives from the Financial Supervisory Service, KDB, and the Korea Federation of Banks to review the contingent liabilities of other construction companies, including Lotte Construction, which has recently been discussed in the market, and to examine restructuring plans by distinguishing between projects with concerns of insolvency and those that are already insolvent to normalize PF sites.

As of the end of September last year, the scale of real estate PF loans in the financial sector was 134.3 trillion KRW, with bridge loans amounting to 30 trillion KRW and main PF loans reaching 104 trillion KRW. Lee Bok-hyun, Governor of the Financial Supervisory Service, emphasized regarding real estate PF, "We are preparing various measures to an extent that could be considered somewhat excessive," and added, "The government and authorities consistently maintain a principle-based orderly restructuring policy."

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