2024-01-01 10:18:32
1st creditors’ council meeting on the 11th
Direct borrowings from 80 companies total 1.3 trillion won.
Deciding to start a workout won’t be easy
Consideration of expanding the size of the bond fund to 30 trillion won
Financial Supervisory Service Director: “Focus on preventing risk spread”
While Taeyoung Construction applied for a workout (corporate improvement work) on the 28th of last month, Korea Development Bank, the main creditor bank, selected about 400 creditors and sent a notice to convene them. Taeyoung Construction’s project financing (PF) guaranteed debt was found to exceed 9 trillion won. Some in the financial world predict that the decision to start a workout for Taeyoung Construction will be more difficult than for Kumho Industrial (now Kumho Construction), which applied for a workout 10 years ago.
According to the notification of the convening of the first financial creditors’ council that was recently sent by the Korea Development Bank to Taeyoung Construction’s financial creditors on the 1st, Taeyoung Construction’s direct borrowings are estimated to total 1.3 trillion won from 80 companies, including banks, securities companies, and asset management companies. This included corporate bonds, mortgage loans, commercial paper, and PF loans. In addition to direct borrowings, there are a total of 122 businesses where Taeyoung Construction has guaranteed PF loans, and the loan guarantee size is calculated to be KRW 9,181.6 billion. Among these, the CP4 project (58 borrowers, loan guarantee amount of KRW 1.5923 trillion), which creates business facilities in the Magok district of Seoul, was found to be the largest. The number of creditors, including direct loans and PF business loan guarantee obligations, exceeds 400.
The exact size of creditors and the amount of bonds are expected to be confirmed at the council meeting on the 11th, but even if the size is slightly reduced, the process of distributing voting rights is expected to be difficult because so many financial companies, including local mutual financial associations and savings banks, are involved in business loans. An official from the financial sector said, “Normally, there are about 20 to 30 companies at most in a workout, but due to the nature of construction companies with many PF business sites, the number of creditors has increased noticeably.” He added, “The task itself of confirming the creditors and distributing voting rights appears to be difficult.” .
In addition, it has been 10 years since the construction company workout led by the Korea Development Bank was launched by Kumho Industrial (now Kumho Construction) under the former Kumho Asiana Group, and as the Corporate Restructuring Promotion Act was revised in the meantime, meeting the workout requirements became more difficult. As the scope of application expands from the existing ‘financial institutions’ to ‘all financial creditors’, not only financial companies but also general companies and investors holding Taeyoung Construction bonds can participate in the vote to start the workout.
It is reported that financial authorities are considering increasing the maximum operating size of the Bond Market Stabilization Fund (Bond Fund) from the current 20 trillion won to 30 trillion won depending on market conditions. If the real estate PF market becomes tight as a result of this workout application, there may be concerns about a decline in the soundness of second-tier financial institutions and the burden of financing may increase. The bond fund was first implemented in 2008 to relieve the liquidity crunch in the corporate bond market caused by the global financial crisis. Since then, it has played the role of a market ‘firefighter’ as a policy fund whenever a liquidity crisis occurs in the market. The Debt Fund, which was raised to the tune of about 3 trillion won during the COVID-19 incident, was restarted immediately after the ‘Legoland incident’ in 2022, and its operation was extended until the end of December this year.
Meanwhile, Lee Bok-hyeon, head of the Financial Supervisory Service, said in his New Year’s address on this day, “We will revamp the contingency plan (emergency plan) to prevent the transfer and spread of financial market risks and do our best to prevent systemic risks.” “We will secure response capabilities,” he said.
Reporter Min Na-ri
1704106699
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