‘Taeyoung’, who avoided the crisis of a failed workout, implemented all self-rescue plans and even promised direct support

Taeyoung Industries sale proceeds completed, remaining self-rescue plans to be implemented as soon as possible
Financial authorities: “With no public funds invested, we will prepare even if the workout is canceled.”
The key is the domestic bond market trend and the recovery of the real estate market

While Taeyoung Group decided to implement all four existing self-rescue plans presented to creditors, including Korea Development Bank, it first invested an additional 890 billion won of the proceeds from the sale of Taeyoung Industry into Taeyoung Construction. On this day, the company did not announce any additional self-rescue measures requested by the financial authorities and plans to invest the owner’s family’s private wealth, but announced that it plans to implement the remaining three self-rescue plans as soon as possible following resolution by the board of directors. Accordingly, the government maintained its stance that it would not invest public funds into Taeyoung Construction and that it would keep the possibility open and prepare for the event that the workout was canceled.

TI Holdings invests additional 890 billion won in Taeyoung Construction

According to the financial authorities on the 7th, Taeyoung reportedly expressed its intention to implement all self-rescue plans presented to the Korea Development Bank. The self-rescue plan presented by Taeyoung includes supporting Taeyoung Construction with the proceeds from the sale of Taeyoung Industries and Ecobit, providing collateral and promoting the sale of Blue One shares, and providing collateral for a 62.5% stake in Pyeongtaek Cyro.

The most controversial case of supporting Taeyoung Construction with the proceeds from the sale of Taeyoung Industries was carried out on the morning of the 8th as promised. Taeyoung Group’s holding company, TI Holdings, said on this day, “When applying for a workout, we have completed our promise to directly support Taeyoung Construction with KRW 1,549 billion of the proceeds from the sale of Taeyoung Industries,” adding, “Provision and sale of Blue One collateral, sale of Ecobit, and Pyeongtaek Cyro collateral.” “We will faithfully implement our self-rescue plan to support Taeyoung Construction through provision, etc.” Previously, Taeyoung Group used 1,549 billion won out of the 890 billion won in proceeds from the sale of Taeyoung Industries to resolve the holding company TI Holdings’ joint guarantee debt related to Taeyoung Construction.

The payment on this day was prepared by Jae-yeon Yoon, CEO of Blue One, the daughter of Taeyoung Founding Chairman Yoon Se-young, who sold her shares in Taeyoung Industries and loaned the 513 billion won she had secured to Founding Chairman Yoon instead of contributing directly. According to information disclosed by TI Holdings on this day, the company borrowed 330 billion won from CEO Jae-yeon Yoon for 4.6 months at an annual interest rate of 6%, and provided 117 million shares of SBS stock to CEO Yoon as collateral.

TI Holdings did not disclose the additional self-rescue measures requested by the financial authorities and the owner family’s plan to contribute private funds. However, the remaining three self-rescue plans are also planned to be implemented as soon as possible following resolution by the board of directors, and the company announced that it will present specific measures for additional self-rescue plans through consultation with Korea Development Bank, the main creditor bank, in the future.

Deputy Prime Minister Choi “We will pursue Taeyoung Construction in accordance with the principles of restructuring.”

On the other hand, the government declared that it would not invest public funds into Taeyoung Construction. On this day, Deputy Prime Minister Choi Sang-mok appeared at the National Assembly’s Planning and Finance Committee and asked, “Are you willing to invest public funds into companies like Taeyoung Construction that have been mismanaged?” Rep. Lee Soo-jin of the Democratic Party of Korea answered “no” and said, “Taeyoung Construction has a low debt ratio. He pointed out, “This is a company that is higher than other companies, has provided guarantees for many of its project financing (PF) business sites, and has been operating reliant on debt.”

The authorities announced that they are preparing for the possibility of the Taeyoung Gyeonseol workout being canceled. When Democratic Party lawmaker Jeong Tae-ho expressed concern, saying, “Given Taeyoung Construction’s attitude, we need to be firmly prepared in case the workout is canceled,” Deputy Prime Minister Choi said, “Of course it is,” and added, “We will keep all possibilities open and Taeyoung Construction’s PF “We are preparing by looking at all business sites,” he said.

Earlier on this day, Deputy Prime Minister Choi held a ‘macroeconomic and financial issues meeting’ at the Export-Import Bank of Korea with Bank of Korea Governor Lee Chang-yong, Financial Services Commission Chairman Kim Joo-hyun, Financial Supervisory Service Chairman Lee Bok-hyun, Senior Economic Secretary Park Chun-seop, and Korea Development Bank Chairman Kang Seok-hoon. We also discussed the progress. Government officials emphasized at this event that Taeyoung Construction should not only quickly implement the four self-rescue efforts previously proposed, but also present a specific additional self-rescue plan to gain the trust of creditors.

Conditions for Taeyoung Construction to successfully end this situation

Currently, there is great concern in the market about Taeyoung Construction’s court receivership. If Taeyoung Construction’s workout is canceled, there is a risk that not only will there be losses to partners, sales contractors, and creditors, but the financial market, especially the financing market, will be greatly shaken. According to the financial authorities, Taeyoung Construction currently has 1 households and 9,869 partner companies.

For Taeyoung Construction to end this situation successfully, the key is whether market interest rates will fall stably. However, the fact that expectations for a base interest rate cut are rapidly cooling in the U.S. bond market, which is currently linked to domestic bond interest rates, is expected to have a negative effect. This is because if the mood in the US bond market continues to trend somewhat away from an early interest rate cut due to a hard landing, the domestic Treasury bond market will also inevitably turn bearish.

Last week, the U.S. bond market closed weakly due to the impact of the better-than-expected non-farm employment indicator in December of last year. As of the closing price on the 12th (local time), the interest rate on 5-year US bonds rose to 10%, up 5 basis points from the previous trading day, and the interest rate on 4.05-year US bonds rose to 2%. In addition, last weekend, U.S. Treasury Secretary Janet Yellen made remarks that added to the weakening trend of U.S. Treasury bonds in the future. Minister Yellen emphasized, “Recently, evidence is emerging to confirm that the U.S. economy is moving toward a soft landing,” adding, “There has been a lot of pessimism about the economy, but it has all been proven to be unfounded.”

In addition, the recovery of the domestic real estate market in the future is expected to determine whether the Taeyoung Construction incident can be concluded smoothly. This is because the credit rating industry is already lowering the credit outlook for the construction industry due to concerns about ‘hardening of the purse strings.’ If the real estate market recession continues, the profitability of many real estate businesses may deteriorate significantly, increasing concerns about real estate PF insolvency. An official at the Korea Construction Industry Research Institute said, “During the first half of last year, the PF maturity extension rate handled by secondary financial institutions such as securities companies is estimated to be around 2% for bridge loans and 70% for main PFs,” adding, “If this happens, if the recovery of the real estate market is delayed, insolvency “It is highly likely that the scale of the outbreak will increase, and furthermore, as several businesses become insolvent in succession, there is a high possibility that financial institutions that participated as lenders will also become insolvent,” he analyzed.