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Taeyoung E&C wins approval for debt restructuring plan

Published: 01 May. 2024, 18:44

SARAH CHEA
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A flag with the logo of Taeyoung Engineering & Construction at the company's headquarters in Yeouido, western Seoul, on Monday. [YONHAP]

Distressed Korean builder Taeyoung Engineering & Construction, which rattled local markets at the start of the year, won support from creditors to begin restructuring its debt.

The builder of everything from office towers to industrial plants received backing from creditors that hold at least 75 percent of its aggregate debt, according to a statement from its main lender, the Korea Development Bank, meeting the threshold needed to pass.

Taeyoung put a spotlight on mounting bad debts in Korea’s property sector earlier this year, rekindling memories of a default in 2022 by the developer of a Legoland amusement park that sent some corporate borrowing costs soaring above decade highs. Taeyoung shocked investors by seeking a debt restructuring at the end of last year, forcing authorities to reassure the market of their readiness to prevent contagion, which calmed nerves.

The KDB said that Taeyoung and creditors will immediately implement the agreed restructuring and project-financing workout, with stable liquidity to be secured by the end of 2025 with the timely execution of the plan.

The bank said earlier this month that Taeyoung will need a debt-to-equity swap of about 1 trillion won ($726 million) to erase capital impairments. Financial creditors would convert 50 percent of unsecured debt into equity and allow the ailing builder to defer repayment on the remaining amount for three years under the plan.

Still, Taeyoung is unlikely to be the last builder with difficulties repaying shorter-term project finance debt, according to analysts at investment banks including Nomura Holdings. Economists at Citigroup estimate that 111 trillion won of the country’s project-finance debt is “troubled,” according to a report last month.

Delinquency rates at one key group of Korean lenders nearly doubled to 6.55% last year, and concerns about the impact of souring loans for shadow banks, in particular, are elevated.

Taeyoung’s 90-year-old founder, Yoon Se-young, who founded the company half a century ago, returned to the helm of the conglomerate late last year to try to save the builder. The Taeyoung Group includes Seoul Broadcasting System, which is at the forefront of the Korean drama wave that swept Asia before expanding globally in recent years.

Bloomberg