Taeyoung's 'PF Project Sites' 4 Locations Fail to Submit Handling Plans and Delay Inspections... 'Improvement Plan Resolution' Postponed

Taeyoung Construction Faces 'Complete Capital Impairment' After Reflecting Expected PF Loss
Trading Halt from 14th... KDB Says "No Impact on Workout Process"

On the 11th, the fate of Taeyoung Construction, which applied for a workout (corporate restructuring) after failing to repay real estate project financing (PF) loans worth around 9 trillion won, is being decided, creating tension at Taeyoung Construction in Yeongdeungpo-gu, Seoul. Photo by Jo Yongjun jun21@

The creditor group of Taeyoung Construction, which has entered workout (corporate financial restructuring), ultimately postponed the resolution procedure for the corporate improvement plan that was scheduled to be held on April 11. This is because a significant number of Taeyoung Construction's project financing (PF) sites submitted their 'site handling plans' past the deadline, and four sites, including 2 to 3 related to the Housing and Urban Guarantee Corporation (HUG), have yet to submit handling plans. To make matters worse, Taeyoung Construction fell into a state of complete capital erosion after reflecting the expected losses from PF sites, and its trading was suspended on the KOSPI market.

According to Taeyoung Construction's creditor group on the 14th, KDB Industrial Bank, the main creditor bank, postponed the resolution plan for the 'Taeyoung Construction Corporate Improvement Plan' originally scheduled for April 11 by up to one month. The procedures such as due diligence on each PF site of Taeyoung Construction have been slower than expected, reportedly due to requests from the auditing firm conducting the due diligence. The resolution of the corporate improvement plan must be done within three months from the start date of the workout, but it can be extended by up to one month once.

An official from the Industrial Bank explained, "The PF site groups and the auditing firm conducting due diligence on Taeyoung Construction have requested additional time to analyze the PF site handling plans submitted by the PF lenders and to assess the overall economic impact on Taeyoung Construction," adding, "Considering the various conditions of the PF sites, we judged the auditing firm's request to be reasonable and decided accordingly."

In fact, among the 59 PF sites of Taeyoung Construction, it is known that four sites still have not submitted handling plans. According to Taeyoung Construction and the creditor group, some of these sites are still undergoing or planning on-site inspections. The Industrial Bank initially requested each PF site lender group to submit handling plans by the 10th of last month, and extended the deadline to the 26th due to unfavorable circumstances at the sites. Nevertheless, only about half of the sites submitted handling plans by the 26th.

The Industrial Bank plans to continue receiving 'handling plans' for the four PF sites while working with the auditing firm responsible for Taeyoung Construction's due diligence to establish the corporate improvement plan. The auditing firm is conducting due diligence on potential losses attributable to guarantee liabilities, given the large scale of guarantee obligations due to the nature of Taeyoung Construction's operations, which include numerous PF projects and social overhead capital (SOC) projects, following established standards and methods for construction company workouts.

The corporate improvement plan to be established based on this will include PF site handling plans, financial structure improvement measures (debt restructuring of main creditor and guarantee claims), liquidity procurement plans, company management plans, and management control measures. An Industrial Bank official stated, "According to the resolution of the first consultation meeting in January, the main creditor bank can extend the resolution deadline for the corporate improvement plan by up to one month through notification, so the consultation committee plans to submit and proceed with the resolution procedure within the possible extension period."

Additionally, Taeyoung Construction disclosed that as of the end of last year, its total capital was -562.6 billion KRW, indicating a state of complete capital erosion. This occurred about 3 months and 15 days after the workout application, as liabilities of 5.8429 trillion KRW exceeded assets of 5.2803 trillion KRW. Consequently, the Korea Exchange's KOSPI Market Headquarters suspended trading of its shares starting on the 14th.

Taeyoung Construction explained that regarding the complete capital erosion, it reclassified debts expected to result in losses among guarantee liabilities for PF sites, which had previously been classified as contingent liabilities, as principal debts, and also impaired parts of PF construction-related assets expected to be difficult to recover, resulting in large-scale losses. The Industrial Bank emphasized that this is a common occurrence during the workout process and does not affect the normal progress of the workout. An Industrial Bank official said, "Even if Taeyoung Construction's trading is suspended due to capital erosion and it meets the delisting criteria, it does not affect the workout procedure," adding, "The auditing firm previously selected is conducting due diligence on all management conditions of Taeyoung Construction, including PF sites."

Going forward, if Taeyoung Construction resolves the delisting criteria through capital expansion within the improvement period granted by the Korea Exchange according to the corporate improvement plan, trading can be resumed through a certain review process. The main creditor bank, Industrial Bank, plans to promptly implement normalization measures such as capital expansion if the corporate improvement plan is approved, to minimize negative impacts caused by prolonged trading suspension and delisting risks. The Industrial Bank added, "If the corporate improvement plan is reasonably and promptly established and implemented, it can minimize the impact on creditors, the company, and all stakeholders."

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