Taeyoung Construction, Which Broke Its First Promise, Holds Creditors' Meeting Today

It is expected whether Taeyoung Construction will announce a convincing and stringent self-rescue plan at the creditors' briefing related to its workout application. Financial authorities and creditors have expressed doubts about the major shareholder's self-rescue efforts, and the possibility of selling TY Holdings shares held by SBS or the owner family is also being mentioned.

According to the financial sector on the 3rd, the Korea Development Bank, the main creditor bank of Taeyoung Construction, will hold a briefing at 3 p.m. at its Yeouido headquarters for about 400 creditors. The agenda for the first creditors' meeting scheduled for the 11th, including the formation and operation of the creditors' council, evaluation of Taeyoung Construction's viability, and establishment of management standards for real estate project financing (PF) sites, will be discussed at this meeting.

The Taeyoung Construction flag is fluttering in the wind at the Taeyoung Building in Yeongdeungpo-gu, Seoul. / Photo by Jinhyung Kang aymsdream@

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◆ Will a self-rescue plan meeting creditors' expectations emerge? = Taeyoung Construction's self-rescue plan is also expected to be partially disclosed. Taeyoung Construction's workout requires the consent of more than 75% of creditors based on credit extension amounts under the Corporate Restructuring Promotion Act. With PF loan guarantees exceeding 9 trillion won, Taeyoung Construction must persuade creditors through its self-rescue plan at this briefing. Without a high-intensity self-rescue plan, initiating the workout could become difficult.

The self-rescue plan is expected to include the sale of affiliate shares such as the comprehensive environmental company Ecobit and golf course operator Blue One. Contributions from the major shareholder's personal funds and additional share collateral are also likely to be disclosed. In particular, attention is focused on the scale of personal fund contributions from the owner family, including Yoon Se-young, the founding chairman of Taeyoung Group, as it can serve as an indicator of their commitment. Authorities and creditors are reportedly demanding contributions exceeding 300 billion won.

Some creditors have pointed out that a gesture of sincerity should be shown by at least offering shares of the major affiliate SBS. Although Taeyoung insists that there are no plans to sell or provide collateral for SBS shares, if persuading creditors becomes difficult, it is expected that this option may be used as a last resort.

Authorities and creditors are known to plan to include enforcement guarantees and other measures in Taeyoung Construction's self-rescue plan, due to the owner side's passive attitude toward self-rescue efforts, which differ from initial promises.

◆ Growing suspicion that Taeyoung Construction may be sacrificed to protect SBS = On the 29th of last month, Taeyoung Construction did not repay 45.1 billion won of accounts receivable secured loans out of 148.5 billion won in commercial bonds that matured. Initially, TY Holdings, the holding company of Taeyoung Construction, and the owner family had agreed to lend 206.2 billion won from the sale proceeds of affiliate Taeyoung Industry (Yoon Seok-min, chairman of Taeyoung Group, 41.6 billion won; Yoon Jae-yeon, CEO of Blue One, 51.3 billion won; TY Holdings, 113.3 billion won) to Taeyoung Construction, but the funds were first used to resolve TY Holdings' debt guarantees. TY Holdings' debt guarantee amounts to 100 billion won, of which about 89 billion won was recently repaid.

TY Holdings had previously resolved and disclosed a decision to lend 113.3 billion won to Taeyoung Construction but did not fulfill it. After disclosing the money lending decision yesterday, it explained that only 40 billion won out of the 113.3 billion won was lent first. Since the 113.3 billion won limit and the term are one year, and the contract stipulates that support will be provided upon request for necessary amounts by Taeyoung Construction, there is no problem. It also disclosed that it paid the 40 billion won requested by Taeyoung Construction to repay commercial bonds, and the remaining 73.3 billion won will be executed according to Taeyoung Construction's needs.

This has led to speculation that TY Holdings intends to abandon Taeyoung Construction while keeping the core affiliate SBS. Amid ongoing controversy, founding chairman Yoon Se-young said in a New Year's greeting to group employees the day before, "To not betray the expectations of the creditors, our on-site partners and their families, buyers, and prospective residents, we will do our utmost to successfully and early graduate from the workout," adding, "Although applying for workout is disgraceful, if Taeyoung Construction overcomes the crisis through this, the system will ultimately be a great gift."

Meanwhile, Taeyoung Construction, ranked 16th in construction capability, began the workout process after failing to repay 48 billion won in PF loans related to an office development project in Seongsu-dong, Seongdong-gu, Seoul, which matured on the 28th of last month. If more than 75% of creditors agree at the creditors' meeting on the 11th, the workout will commence.

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