Credit: Public domain
South Korea’s weakening real estate market is claiming the lives of construction companies. This year, 405 construction companies shuttered their operations, up nearly double year-over-year from the 211 construction companies that failed in 2022. It was the worst year for construction company shutdowns since 2006, when South Korea was still feeling the after-effects of the 1997 East Asian Financial Crisis.
Even the largest construction companies have been pushed to the brink. According to an exclusive by Kukmin Ilbo 국민일보, Tae Young Engineering & Construction Co. Ltd. 태영건설, a top-15 construction firm that also owns the television station SBS, pleaded with South Korea’s financial regulators to relax standards for loans in order to let the company borrow more money to service its debts. As of June 2023, Tae Young has an outstanding debt guarantee of KRW 4.3t (USD 3.2b), of which KRW 459b (USD 344m) comes due by the end of this year. Tae Young cannot pay without additional loans, as many of the company’s construction projects failed to launch due to lack of demand.
Tae Young visited the Financial Services Commission 금융위원회 and Financial Supervisory Service 금융감독원 to argue that unless the financial regulators allowed it to take out more loans, the company would fail and take smaller construction companies down with it. Also exposed to Tae Young is Meritz Financial Group 메리츠 금융그룹, which led the financing of many of the Tae Young projects that are currently on hold.