Ssangyong E&C creditors relent on workout deal

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Ssangyong E&C creditors relent on workout deal

Cash-strapped Ssangyong Engineering & Construction will avoid bankruptcy after five creditor banks agreed to inject 25 billion won ($23 million) in liquidity support to help the country’s 13th largest builder repay maturing debts, the Financial Supervisory Service said yesterday.

Creditors will meet Monday to finalize approval of the debt workout program sought by Ssangyong E&C on Tuesday, the FSS said.

“Creditors agreed to proceed with a workout program in a constructive manner as the financial market and subcontractors of Ssangyong Engineering & Construction would be hit hard if Ssangyong goes bankrupt,” said Kim Jin-soo, a senior official at the FSS.

Industry observers have raised concerns that Ssangyong E&C’s bankruptcy would have a huge impact as the builder is working at 130 sites with 1,400 other companies in Korea and has 3 trillion won worth of projects overseas at 17 construction sites.

Yesterday’s decision came after Woori Bank, Korea Development Bank, Shinhan Bank, Hana Bank and KB Kookmin Bank sat down for talks in a meeting organized by the financial watchdog.

During Tuesday’s meeting, creditors agreed to use 5 billion of 25 billion won in liquidity support fund to help cash-short Ssangyong E&C repay 30.3 billion won of debt that’s due today and 11.2 billion won for debt maturing in March.

If the builder’s workout application is approved by 75 percent of 23 creditors next week, this will be the second time Ssangyong E&C has used such a program.

Ssangyong E&C entered a workout after the 1998 Asian financial crisis and completed the program in October 2004.

Given that five creditors agreed to inject liquidity support even before Ssangyong’s application for a debt-workout program gets the green light, observers said chances of Ssangyong getting an official approval are high given that it owes 49.2 percent of its debt to the five banks.

Creditors are expected to have 45 days to perform due diligence of the company’s operations and will then unveil a management normalization plan that may include injecting new money, extending loan repayment deadlines and lowering interest rates.

Ssangyong E&C Chairman Kim Suk-joon welcomed the news.

“We owe a great debt to creditors, and we should make every effort to normalize the operation of the company,” Kim was quoted as saying in a meeting with executives yesterday.

The future of the Ssangyong E&C chief and executives will be determined at the company’s board of directors’ meeting March 8.

Although the former largest shareholder of Ssangyong E&C, Korea Asset Management Corporation, issued an official document discharging Kim, creditors said they need to discuss over the matter.

By Kim Mi-ju []
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