Decision on Taeyoung's 400 Billion Won Support to Be Made on the 23rd

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As the project financing (PF) lenders for Taeyoung Construction's projects face difficulties in reaching agreements, the main creditor bank, KDB Industrial Bank, is planning to provide funding support worth 400 billion KRW to prepare for 'operational fund mismatches.' Although Taeyoung Group is pushing for the sale of various assets including Ecobit, Pyeongtaek Cyro, golf courses, and hotels, the pace is not as fast as the creditors expect. This measure is also in anticipation of ongoing maintenance costs until the final approval of the corporate improvement plan scheduled for April.

The creditors have also decided to resolve the repayment issue of 45.1 billion KRW in outstanding accounts receivable secured loans (ARS loans) from Taeyoung Construction's subcontractors, which had been delayed due to their classification as financial claims following the workout (corporate financial restructuring) application, after about two months.

According to Taeyoung Construction's financial creditors on the 19th, KDB will convene a financial creditors' meeting on the 23rd to present the agenda items of the 400 billion KRW support plan and the early repayment of ARS loans. The 400 billion KRW support plan involves KDB providing priority funding at an annual interest rate of 4.6% with a maturity date of May 30, and any subsequent losses will be borne by the creditors proportionally through a short-term credit line loan, effectively functioning as a 'negative account.'

KDB will secure 55,660,17 shares of SBS stock held by TY Holdings as collateral in exchange for the 400 billion KRW support to Taeyoung Construction. Based on the closing price on the 16th (25,850 KRW), this amounts to approximately 140 billion KRW. The SBS shares provided as collateral by TY Holdings exclude the 11,720,000 shares previously pledged to the creditors.

Additionally, shares of TY Holdings held by Chairman Yoon Seok-min and Honorary Chairman Yoon Se-young will also be pledged as collateral. The combined shareholding of 13,094,765 shares, representing 25.2% of Chairman Yoon Seok-min's stake and 0.5% of Honorary Chairman Yoon Se-young's stake, is valued at approximately 52 billion KRW based on the closing price of 4,015 KRW on the 16th. Furthermore, Taeyoung Group is known to be providing liquid assets such as Blue One shares, proceeds from the sale of Ecobit and Pyeongtaek Cyro, as well as shares in Taeyoung D&I and SK Ecoplant as collateral.

However, the 400 billion KRW support approved by the creditors' meeting will not be disbursed all at once. It will serve as a liquidity supplement to be used as needed in case the asset sale schedule pursued by Taeyoung Group is delayed and funding becomes difficult. If the funds provided are ultimately written off as losses, KDB along with Hana Bank, NH Nonghyup Bank, Woori Bank, and Shinhan Bank will bear the losses proportionally.

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The immediate issue is the handling of 59 out of 60 PF projects previously pursued by Taeyoung Construction, excluding one project. Initially, the PF lenders planned to finalize and submit the handling plan to KDB by the 10th, but due to complex interests, the deadline was postponed once to the 25th. For Samil Accounting Corporation to complete the due diligence on Taeyoung Construction's assets and liabilities as scheduled, the PF lenders' handling plan must be finalized first, leaving little time.

A KDB official stated, "The PF lenders for each project will establish handling plans based on the due diligence results and submit them to KDB by the 25th. The due diligence results for Taeyoung Construction, including the PF project handling plans, may be released in March but could be extended depending on the situation."

If the due diligence on Taeyoung Construction is delayed, the creditors' meeting scheduled for April 11 to decide on the corporate improvement plan may also be postponed. Although the workout procedure allows for a one-time extension of up to one month, this inevitably increases the creditors' risk exposure. Even the 'Magok CP4 project,' where 370 billion KRW was injected to continue the project, is facing difficulties in reaching detailed agreements.

[Image source=Yonhap News]

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Meanwhile, KDB has also placed the agenda of 'early repayment of ARS loans' on the creditors' meeting. Taeyoung Group caused conflicts with creditors and financial authorities by failing to repay 45.1 billion KRW of ARS loans out of 148.5 billion KRW in trade receivables that matured at the end of December last year. Financial authorities and KDB have been continuously discussing with creditors to promptly resolve the ARS loan issue to prevent the spread of Taeyoung Construction's workout crisis. It is reported that there is no disagreement within the creditors regarding the early repayment of ARS loans as it involves supporting subcontractors.

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