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Taeyoung's 400 creditors to seek resolution over shaky loans, project financing guarantees
A corporate flag of Taeyoung Engineering & Construction / Yonhap
By Lee Kyung-min
About 400 creditors of the troubled local builder Taeyoung Engineering & Construction will seek the recovery of 1.37 trillion won ($1.05 billion) in shaky loans and project financing guarantees exceeding 9.18 trillion won on Jan. 11, state-run lender Korea Development Bank (KDB) said Monday.
The country's 16th-largest industry player filed for corporate debt restructuring last week, prompted by a failed payment of 48 billion won on a project financing debt due Dec. 28.
Priority-weighted makeup of creditors and the liable amount total will be finalized at the KDB-led meeting next week, setting the course for the debt workout in the months to come.
Market watchers say the procedure could prompt a full-blown liquidity crunch, as indicated in significant part by an accelerated drawdown in asset-backed commercial paper (ABCP) issuances over the past few weeks. Fueling the bond market tightening concerns is the authorities’ mandate for outright restructuring of project financing loans over simple maturity extensions.
The finance ministry is expected to raise the bond market stabilization fund volume to 30 trillion won, up from 20 trillion won, in an emergency move to provide liquidity to low-credit, high-risk project financing lenders including brokerages, insurers and savings banks.
Figures
KDB said Taeyoung has 1.3 trillion won in outstanding direct borrowing from a combined 80 commercial lenders, brokerages and asset managers. Included forms of credit are corporate bonds, collateral-backed loans, corporate papers and project financing loans.
Also among the builder’s liabilities are project financing guarantees of over 9.18 trillion won concerning 122 construction sites.
Topping the list of guarantee liabilities is an ongoing project involving 58 borrowers over a combined 1.59 trillion won in loan guarantees. The project plans to construct a business complex housing key facilities in southwestern Seoul's Magok region.
The KDB figures are far greater than the Financial Services Commission (FSC) estimate. The financial regulator said Taeyoung has a total exposure of only 4.58 trillion won. Included were 540 billion won in direct borrowing and 4.3 trillion won exposure from 29 construction sites.
Meanwhile, the local bond market is bracing for a full-fledged Taeyoung crisis.
According to Shinhan Investment & Securities, the volumes of A1 and A2 project financing-ABCP trading in the fourth week of last month stood at about 2.16 trillion won and 340 billion won, respectively.
These are marked double-digit month-on-month falls from 6.16 trillion won and 650 billion won, respectively. The drops were 65 percent and 47 percent.
Samsung Securities researcher Lee Kyoung-ja said the stability of project financing is expected to experience an industry-wide decline, as prodded by government moves to lower project financing delinquency rates.
“Bridge loan-mediated construction projects will have a heavier risk burden due to repeated maturity extensions over the past few years. The government-guided restructuring to fortify the financial soundness of questionable lenders of risky project financing profiles will take shape soon.”
A bridge loan is a high-risk, high-interest loan operated mostly by securities firms or savings banks for the short term, as a line of credit extended widely for years of project financing.