‘Workout confirmed’ Taeyoung Construction corporate bonds absorb demand for ants

Ants pouring money into Taeyoung 68, were they looking for profits after workouts?
Investment conditions appear ‘attractive’ due to bond craze and falling prices
In reality, it is a gamble full of risk, and if you are not careful, you may not even be able to get the principal

The trading volume of Taeyoung Construction’s public offering corporate bonds, which has begun a full-fledged workout, has surged. According to the Korea Exchange, the daily average trading volume of ‘Taeyoung Construction 68’ bonds this week was 15 million won. Taeyoung Construction 3,189 is the only public bond of Taeyoung Construction currently traded on the exchange, and its price has been steadily sliding since the workout application. As demand for bond investment from individuals seeking to improve business conditions increases, the market is warning that risks must be fully considered when investing.

Prices slipped after workout, individual investment flocked

Taeyoung Construction 68 is a 2021-year bond issued in 3 and was scheduled to expire on July 7th, but currently, due to Taeyoung Construction’s workout application, an EOD has occurred. EOD refers to the right to collect the remaining debt at once even before the loan maturity if the creditor determines that the debtor’s credit risk has increased. The three major domestic credit rating agencies have downgraded the bond’s credit rating by 19 levels from A- to CCC.

Last month, just before the workout application, Taeyoung Construction 68’s average daily trading volume was only about 6,100 million won. However, as the workout movement became visible, demand from individual investors began to gather in earnest. On the 28th of last month, the day of the workout application, Taeyoung68’s daily trading volume reached a whopping 39 billion won, and this week, the average daily trading volume surged by about 6,300 times compared to last month. With bond prices showing a notable decline, expectations of profit realization through future workouts appear to have been reflected.

In fact, the price of Taeyoung Construction 68 plummeted to 28 won on the 6,124th of last month when Taeyoung Construction applied for a workout. Early this month, it temporarily rose to the 6,300 won range due to the influx of purchase demand from individual investors, but it has since weakened again and the price has been steadily sliding. As of 12 p.m. on the 3th, Taeyoung Construction 86’s trading price is in the 6,150 won range. However, the daily trading volume, which was about 10 billion won on the 31th and 11 billion won on the 11th, decreased slightly to about 8,900 million won.

If you invest recklessly following the ‘bond craze’, you will get seriously hurt

The ‘bond craze’ among individual investors also appears to have fueled the Taeyoung Construction investment craze. According to the Korea Financial Investment Association, the net purchase of bonds by individual investors last year (January to November) amounted to 1 trillion won. This is an increase of approximately 11% compared to the annual net purchase volume in 34 (KRW 5,941 trillion). It is interpreted that demand for investments aimed at profit from trading has increased sharply, fueled by the prospect that interest rate cuts will begin this year.

However, experts point out that Taeyoung Construction 68 investment is slightly different from general bond investment. It is pointed out that even if the start of the workout is confirmed, the enormous investment risk should not be overlooked. Workouts are not ‘all-purpose’. There is a risk that recovery of principal may become difficult in the future through workout processes such as debt restructuring and equity conversion. There is a high possibility that individual investors will not have a voice in the private bondholder rally held after the workout begins. This is because institutions own 68% of Taeyoung 88 bonds. Currently, Taeyoung 68’s major investors include Kiwoom Investment & Asset Management (KRW 500 billion), Multi-Asset Asset Management (KRW 200 billion), Samsung Securities (KRW 20 billion), Samsung Asset Management (KRW 100 billion), Korea Development Bank (KRW 80 billion), and Hi Investment. Securities (20 billion won) are mentioned.

There is also concern that the workout may be halted if any inadequacies are discovered during the due diligence process. This is because Taeyoung Construction’s creditors are emphasizing that “if the self-rescue plan promised by Taeyoung Group is not followed during the due diligence process or if large-scale additional insolvency is discovered, the workout procedure may be halted.” If the workout is halted, creditors’ risk of loss increases exponentially. In the end, investing in Taeyoung Construction 68 is a kind of ‘gambling’ where the risk is as great as expected.