Taeyoung Construction to Complete 'Corporate Improvement Plan Resolution' in April... Accelerating Joint Management 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@

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KDB Industrial Bank, the main creditor bank of Taeyoung Construction, plans to complete the creditor group resolution process on Taeyoung Construction's corporate improvement plan by the end of April and accelerate the joint management procedures, including the implementation of the corporate improvement plan. Based on the due diligence results of Taeyoung Construction's project financing (PF) sites, the due diligence work on Taeyoung Construction is also in its final stages, indicating a determination not to postpone the creditor group resolution schedule beyond May.

According to the main creditor group of Taeyoung Construction on the 5th, Industrial Bank plans to establish the corporate improvement plan based on the due diligence results by mid-April and complete the resolution process within this month. The creditor group resolution on Taeyoung Construction's corporate improvement plan was originally scheduled for the 11th but was postponed up to a maximum of one month (until May 11) at the request of the auditing firm due to delays in the PF site due diligence. A senior official from the main creditor bank said, "So far, there have been no major issues with the due diligence and various procedures related to Taeyoung Construction," adding, "The resolution process for the corporate improvement plan will not extend beyond May."

The corporate improvement plan comprehensively includes ▲ PF site handling measures ▲ financial structure improvement measures ▲ liquidity procurement measures ▲ company management plans and management control measures. The normalization plans for each PF site, which had been the biggest obstacle, have been submitted for all sites except the Banpo urban-type residential housing construction site in Seoul, and negotiations regarding new fund injections among the major creditor groups are underway for each PF site that has submitted normalization plans.

The CP4 project, a Seoul Magok development project classified as a prime PF site, recently agreed to receive new loans at an annual interest rate of 8% from the major creditor group including Shinhan Bank. The creditor group reached this conclusion through negotiations with the project operator 'CP4 PFV' and plans to inject 370 billion KRW at an 8% annual rate, including a 1% handling fee, by the end of April. The composition of the project operator CP4PFV is IRDV (45%), Taeyoung Construction (30%), Aegis Asset Management (20%), and Meritz Securities (5%).

Financial authorities are also encouraging a smooth landing of the PF market by holding consecutive meetings with the financial sector and construction industry regarding PF. On the 4th, Kim So-young, Vice Chairman of the Financial Services Commission, met with CFOs of 14 major construction companies, including related construction organizations, to listen to the industry's difficulties and urged efforts for a smooth landing of PF. On the 21st of last month, Lee Bok-hyun, Governor of the Financial Supervisory Service, held a 'Meeting with Financial Sector and Construction Industry to Promote Normalization of Real Estate PF' and announced plans to publicize the evaluation criteria for PF project viability and the restructuring of major creditor group agreements within April.

Since the second half of 2022, the government has expanded market stabilization measures from '50 trillion KRW + alpha (α)' to '85 trillion KRW + α' in cooperation with related ministries such as the Ministry of Economy and Finance and the Ministry of Land, Infrastructure and Transport. In particular, it plans to promptly implement and supply PF operator guarantees worth 9 trillion KRW and non-residential PF operator guarantees, as well as actively execute financial support related to construction companies amounting to 8 trillion KRW.

If the creditor group's resolution on Taeyoung Construction's corporate improvement plan is achieved as planned in April, it is expected that an agreement for the implementation of the improvement plan can be signed in May. The agreement will include detailed items such as Taeyoung Construction's management goals and implementation plans, based on which the creditor group will proceed with joint management procedures for Taeyoung Construction.

A financial sector official explained, "Although some PF sites have not yet completed negotiations with the major creditor group, it is unlikely to significantly affect the overall workout process," adding, "How the market interprets and accepts Taeyoung Construction's forthcoming corporate improvement plan will be an important point to watch."

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