Taeyoung's debt workout is exceptional; limited market impact expected: finance minister
Finance Minister Choi Sang-mok speaks during a parliamentary session in Seoul, Jan. 8. Yonhap
Taeyoung Engineering & Construction's application for a debt-restructuring program would have limited impact on the construction industry, as it is "an exceptional case" in terms of the exposure to real estate project financing (PF) loans, the finance minister said Monday.
Finance Minister Choi Sang-mok made the remarks during a parliamentary session as concerns have risen over its possible spillover effects into troubled peers in Korea and the overall financial system.
Last month, the ailing builder requested a debt workout due to a cash crunch, and its creditors, led by the state-run Korea Development Bank (KDB), are reviewing self-rescue measures presented by the company to make a decision on whether to initiate a workout process.
"Compared with other construction companies, Taeyoung has been heavily dependent on PF loans, which is a bit exceptional. I think its impact on other builders would be limited," Choi said.
The government has called on Taeyoung and the creditors to strive further for a settlement, and the government is "open to every possibility and thoroughly preparing for various measures" to stabilize the financial market and protect related companies and consumers.
It requires 75 percent approval from about 600 creditors to initiate the debt-restructuring process, and the final decision will be made during the meeting slated for Thursday.
"The government takes this case seriously and will well manage the situation based on the principle of a workout scheme," Choi added.
The government cited the risk management regarding PF loans and other vulnerable sectors as one of its key economic policy goals for 2024, and vowed to expand liquidity supply programs from the current level of 85 trillion won ($64.59 billion) to "a sufficient enough level," when needed.
Taeyoung E&C, the 16th-largest builder in Korea in terms of construction capacity, has been suffering from a liquidity shortage amid high interest rates and a slumping property market, and its outstanding PF loans came to 3.2 trillion won. (Yonhap)