High-Intensity Self-Rescue Efforts 'Workout'... How Did Hyundai, Daewoo, and Ssangyong Construction Fare?

by Roh Kyungjo

Published 14 Jan.2024 17:05(KST)

As Taeyoung Construction enters workout proceedings, demanding intense self-rescue efforts, attention is turning to construction companies that have previously undergone workouts. Even top-ranking construction companies in terms of construction capability were not exempt from workouts.

Flags are fluttering in the wind in front of the Taeyoung Construction headquarters in Yeouido, Seoul. / Photo by Jinhyung Kang aymsdream@

According to the construction industry on the 14th, Hyundai Construction, known as the "eldest brother," entered workout in August of the same year under the creditors' decision for management normalization in March 2001. The cause was the liquidity crisis following the International Monetary Fund (IMF) foreign exchange crisis.

Hyundai Construction pursued an order-winning strategy based on profitability and cash flow and endured harsh restructuring, including workforce reductions. As a result, it confirmed graduation from workout at the end of 2005, about four years later, and announced independent management realization on its 59th anniversary in May 2006. Hyundai Construction's sales in 2006 reached 5.0849 trillion won, and orders amounted to 9.2408 trillion won.

Some construction companies entered workouts as their groups disbanded. Daewoo Construction is a representative case. Daewoo Construction entered workout with the Daewoo Group in August 1999 and ended the workout in December 2003 after the group was dismantled.

However, it faced difficulties in the "search for an owner" starting in 2004. Daewoo Construction appeared on the M&A market and was acquired by Kumho Asiana Group in 2006 but was returned due to failure of the "put-back option." Eventually, Daewoo Construction was transferred to KDB Industrial Bank in 2010, and after Hoban Construction attempted and gave up on acquisition, it settled with the Jungheung Group in December 2021.

Ssangyong Construction also entered workout around the same time as Daewoo Construction and worked on reconstruction, including reducing about 500 employees over two years. It took about six years to graduate. However, after failing in M&A and worsening financial conditions, it went through workout and even court receivership at the end of 2013. Later, Ssangyong Construction was sold to the Dubai Investment Corporation (ICD) of the United Arab Emirates (UAE) and welcomed Global Sea as its new owner at the end of 2022.

It is unknown how many years it will take for Taeyoung Construction to exit workout. The creditors will conduct due diligence and prepare a financial structure improvement plan together with Taeyoung Construction. This plan will be finalized at the 2nd creditors' meeting on April 11. Meanwhile, the exercise of financial claims against Taeyoung Construction will be deferred. However, the creditors stated that if additional large-scale insolvency is discovered during due diligence or if the self-rescue plan is not implemented, the workout may be suspended.

Meanwhile, Taeyoung Group plans to faithfully implement the four self-rescue plans announced along with the workout application on the 28th of last month and provide shares of the holding company TY Holdings and SBS as collateral in case of liquidity shortage.