Taeyoung E&C Applies for Debt Restructuring

Taeyoung is the largest company to face insolvency in the recent credit crunch.

Taeyoung E&C Applies for Debt Restructuring

Photo: Taeyoung Group headquarters. Credit: Taeyoung Group.

The other shoe has dropped. For months, Taeyoung Engineering & Construction Co. 태영건설, South Korea’s 16th largest construction company, has been rumored to be teetering on the brink of insolvency because of excessive project financing exposure amid a global credit crunch. On December 29, 2023, Taeyoung E&C applied for debt workout, a less formal restructuring process that is a precursor to formal bankruptcy. The triggering event was a KRW 43.2b loan for office building construction in Seoul’s Seongsu-dong 성수동 neighborhood that came due. Taeyoung has a total loan exposure of more than KRW 3t (USD 2.3b).

In a South Korean debt restructuring, an insolvent company may re-negotiate the terms of its loans with the approval of 75% of the creditors’ committee. Typically, the approval comes only after stringent requirements of liquidating assets and receiving assistance from affiliated companies - an indispensable measure in South Korea’s chaebol-led economy, in which virtually every large company is a part of a fleet of affiliated companies. Without the approval, the company falls into the formal bankruptcy process.

It is far from certain that Taeyoung will receive approval. On December 1, 2023, Taeyoung Group sold its affiliate company Taeyoung Industry to the US-based private equity fund KKR for KRW 240b (USD 190m) in order to inject liquidity into Taeyoung E&C. But the Taeyoung Group pledged only KRW 65.9b (USD 50.1m) to Taeyoung E&C, while the rest of the funds were spent extinguishing the debt of the Taeyoung Group’s holding company and paying the founder’s family members who held stakes in Taeyoung Industry.

The creditors’ committee will hold their first vote on January 11. Both the Office of the President 대통령실 and the head of Financial Supervisory Service 금융감독원 have publicly warned that the debt restructuring may fail unless Taeyoung Group does more.

Taeyoung E&C was founded in 1973 by Yun Se-yeong 윤세영, who began his career as a staff member of a lawmaker under the Park Chung-hee 박정희 dictatorship. As a construction company, Taeyoung grew primarily by winning bids for government projects during South Korea’s dictatorship era. In 1990, Yun founded Seoul Broadcasting Service (SBS) 서울방송, which grew into one of South Korea’s five network television stations.

Yun has loudly proclaimed that SBS, one of Taeyoung Group’s twin crown jewels along with its construction business, is not for sale, regardless of Taeyoung’s troubles. Invest Chosun 인베스트 조선 offered a cynical diagnosis: “Taeyoung Group is, at heart, a media group rather than a construction company. It is the only network TV station that can act as the conservative mouthpiece in the election season. … The ruling party absolutely needs SBS, which means the government must step in to save the Taeyoung Group.”

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