Taeyoung E&C's debt restructuring plan is on thin ice

Taeyoung E&C's headquarters in Yeouido, western Seoul [NEWS1]

The main creditor of Taeyoung Engineering & Construction (E&C) expressed concerns over the indebted builder's restructuring plan, clouding prospects for the debt workout program that the company recently filed for.

Korea Development Bank (KDB) Chairman Kang Seog-hoon noted that Taeyoung E&C's self-rescue plan is insufficient to turn the company around, as it would execute fewer funds than were initially pledged.

Taeyoung Group had originally agreed to allocate 154.9 billion won ($118.4 million) from the sale of lucrative subsidy Taeyong Industry to supporting the debt-ridden Taeyoung E&C. But those funds were used to settle debts owed by TY Holdings, Taeyoung E&C's parent company, instead, according to the state-run bank.

“Anticipating creditor approval for a workout merely through a commitment to hard work without presenting a restructuring plan is challenging,” Kang told reporters on Wednesday. “We will strongly encourage Taeyoung to submit a robust self-rescue plan.”

The builder had announced a set of restructuring plans centered around the sale or provision of equity collateral from affiliated companies within the Taeyoung Group during a meeting with creditors earlier that day. Those creditors will decide next week whether to put Taeyoung E&C under a debt workout program.

It was at that meeting where Taeyoung E&C claimed it would utilize the proceeds from the sale of Taeyoung Industry to support its operation. Taeyoung Industry, a logistics company, was sold for 240 billion won in the preceding month.

The proposed self-rescue plan also included the sale of affiliated companies, including waste-to-energy company Ecorbit and golf resort operator BlueOne. It suggested that the firm would put up a 62.5 percent stake in grain handling-and-storage company Pyeongtaek Silo as collateral.

The KDB and 400 other creditors attended the briefing session.

“The amount of project financing [PF] guarantees of Taeyoung E&C stand around 2.5 trillion won,” Taeyoung Group Founder Yoon Se-young said during the creditor session on Wednesday, dismissing media reports that Taeyoung E&C’s PF guarantees amounted to roughly 9 trillion won.

Yoon added, “If given the chance to successfully conclude our business and repay our debts appropriately, every employee is committed to putting forth their utmost efforts to revive Taeyoung.” Reports suggested that he became emotional during the appeal.

However, key details about the scale of capital injection from family members and the potential sale of major private broadcaster SBS shares — both of interest to bondholders — were not disclosed, indicating potential obstacles in the anticipated workout proceedings.

Initiating the workout process would require at least 75 percent approval from creditors.

The final decision on the workout initiation will be determined in the upcoming creditors' meeting scheduled for Jan. 11.

In the event of a rejection, Taeyoung E&C faces the possibility of entering the legal management process, with potential implications for widespread restructuring efforts. Such a process could inflict consequential damage on partner companies.

Following the news from the creditors' meeting, Taeyoung E&C's stock surged by 23.85 percent from the previous trading day to close at 3,245 won on Wednesday. Taeyoung E&C Pref. reached its daily limit increase of 30 percent, while stocks of major shareholder TY Holdings and TY Holdings Pref. increased by 11.89 percent and 29.96 percent, respectively.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]