Ssangyong E&C’s banks agree to debt workout plan

Creditors overseeing cash-strapped Ssangyong Engineering and Construction officially approved a debt-restructuring program yesterday, giving the country’s 13th largest builder space to turn itself around.

The builder’s plan was put to a vote and gained support of 34 creditors who hold 95 percent of Ssangyong E&C’s total debt worth 1.36 trillion won ($1.24 billion) at the creditors’ first official meeting held at Woori Bank headquarters in central Seoul.

Included were the company’s five biggest creditors: Woori Bank, Korea Development Bank, Shinhan Bank, Hana Bank and KB Kookmin Bank.

Under current law, a corporate debt-restructuring must be approved by 75 percent of creditors.

Creditors agreed to delay payback from Ssangyong E&C for three months.

“During the three months, we will determine whether to inject new financial aids to resolve the company’s liquidity crunch after doing due diligence,” said a creditor.

Yesterday’s decision came days after five creditor banks agreed to inject 25 billion won in liquidity support to help the builder repay maturing debt that was due Feb. 28 at a meeting initiated by the Financial Supervisory Service, even before they gave the green light for Ssangyong’s application for a debt restructuring plan yesterday.

After completing due diligence, creditor banks are expected to unveil a management normalization plan that may include injecting new money, extending loan repayment deadlines and lowering interest rates.

Some market observers estimate creditor banks are likely to inject 150 billion won in liquidity support fund as an initial step to salvage the builder and a debt-to-equity swap will take care of 300 billion won of Ssangyong’s total debt of 1.59 trillion won. Others say 150 billion won won’t be enough and creditor banks may have to inject more.

By Kim Mi-ju [mijukim@joongang.co.kr]