Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Gov't urges Taeyoung to bolster self-rescue plan to keep debt rescheduling offer afloat
The banner of Taeyoung Engineering & Construction hangs next to Korea's national flag at the headquarters of the construction company in Seoul, Monday. Yonhap
By Anna J. Park
Troubled construction company yields to mounting criticism over selfish stance in workout talks
The government has urged Taeyoung Group to implement additional self-rescue measures for its financially troubled construction subsidiary, Taeyoung Engineering & Construction (E&C). This move is seen as essential for the conglomerate to rebuild trust with creditors and secure their agreement on a debt-restructuring plan.
The message was conveyed during Monday's macroeconomy and financial affairs meeting at Korea Eximbank in Seoul. The attendees included Finance Minister Choi Sang-mok, Senior Presidential Economic Affairs Secretary Park Chun-sup, Bank of Korea Governor Rhee Chang-yong, Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service (FSS) Governor Lee Bok-hyun, and Korea Development Bank (KDB) Chairman & CEO Kang Seog-hoon.
The participants jointly urged Taeyoung Group to promptly implement four restructuring measures proposed by the group at the time of the workout application at the end of last year and also to submit additional measures to show the conglomerate's sincerity in making the debt restructuring process work.
Taeyoung Group already submitted four self-rescue measures, including transferring 154.9 billion won ($117 million) from the sale of Taeyoung Industry to Taeyoung E&C, financially assisting Taeyoung E&C through the proceeds from the sale of Ecorbit, offering BlueOne shares as collateral and for eventual sale, and providing Pyeong Taek Silo as collateral.
Emphasizing the importance of adhering to a principle-based restructuring plan, the participants also encouraged bondholders to proceed with the workout process, provided they verify the effectiveness of Taeyoung Group's restructuring efforts.
Finance Minister Choi Sang-mok, third from left, speaks during a macro economy and financial affairs meeting at Korea Eximbank in Seoul, Monday. From left are Park Chun-sup, senior presidential economic affairs secretary, Bank of Korea Governor Rhee Chang-yong, Choi, Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service Governor Lee Bok-hyun and Korea Development Bank Chairman & CEO Kang Seog-hoon. Yonhap
The group initially failed to fulfill its promise involving the payment of 154.9 billion won from the sale of Taeyoung Industry to support the debt restructuring of Taeyoung E&C. Contrary to committing to pay the entire amount, the group only disbursed a partial sum of 65.9 billion won. The remaining 89 billion won was instead used to repay debts guaranteed by TY Holdings for Taeyoung E&C.
This infuriated the creditors last week, with the state-run KDB, the representative creditor and bondholder of Taeyoung E&C, arguing that the conglomerate is more interested in maintaining the major shareholder family's control over the group, rather than supporting its debt-ridden construction company.
"Instead of exerting efforts to minimize losses shouldered by Taeyoung E&C's subcontractors and creditors, the group seems to prioritize safeguarding the core stake of the group's owner family members," the FSS governor said last week.
Following criticism from the government and financial regulators for not adhering to its self-rescue measures, Taeyoung Group eventually paid the remaining 89 billion won to support its construction subsidiary on Monday.
"Taeyoung's payment of the 89 billion won has been confirmed," an official at the financial watchdog said.
TY Holdings officially confirmed on Monday that it fulfilled the payment commitment, pledging to execute the remaining three measures in the near future after obtaining board approval.
However, meeting this condition was just a fundamental requirement for Taeyoung Group to advance the workout negotiations. The government and creditors are urging more substantial contributions, like the major shareholder family's personal wealth or pledging key shares of the group's holding company as collateral. This is seen as essential to demonstrate the group's sincerity in the workout process.
According to financial industry sources on Monday, Taeyoung is internally reviewing additional restructuring proposals to submit to financial authorities and bondholders. One potential option under consideration is offering a 30 percent stake in TY Holdings held by founder and Chairman Yoon Se-young as collateral.
"Taeyoung will soon come up with specified plans in close consultation with KDB," the group said on Monday.
Labor union members hold a press conference in front of a building site of Taeyoung Engineering & Construction in Seongdong District in Seoul, Monday. The protestors are demanding Taeyoung to honor unpaid wages. Yonhap
Gov't remais vigilant
Meanwhile, the government said it is fully prepared to handle any uncertainty arising from the Taeyoung situation, pledging to safeguard financial market stability and provide support to the construction industry.
The plan involves promptly executing market stability measures totaling 85 trillion won, if necessary. Furthermore, the government has stated that it is closely monitoring the construction sector to address concerns raised by subcontractors and partner companies.
"Taeyoung E&C is somewhat of an exceptional case, compared to other construction companies, in that the firm relied heavily on project financing," the finance minister said during Monday's parliamentary session. He added that the impact on the overall construction industry will likely be limited.