Taeyoung Construction, which was hit hard by the real estate project financing (PF) crisis, is accelerating the normalization of management by winning orders for redevelopment projects in addition to public construction projects, a year after applying for corporate improvement work (workout). In the market, there are many evaluations that Taeyoung Construction put out the ‘urgent fire’ based on the liquidity it raised by selling valuable affiliates and assets over the past year. Some have expectations of ‘early graduation’ from the 3-year workout program, but many predict that the biggest variable for this will be the result of restructuring of 59 PF business sites that Taeyoung Construction is in progress.
●Received order for private redevelopment project following public construction
According to Taeyoung Construction on the 29th, Taeyoung Construction was selected as the construction company for the housing redevelopment project in Jangam District 6, Uijeongbu, Gyeonggi Province, on the 21st of this month. This is a project to build an apartment complex with 329 units in 6 buildings (2nd basement level to 28th floor) in the area of 351-8 Sangok-dong, Uijeongbu, with a construction cost of 128 billion won. This is the first maintenance project ordered after applying for a workout on December 28 last year. Taeyoung Construction previously won the ‘Seosan-Yeongdeok Line Daesan-Dangjin Expressway Section 3’ project worth 149.2 billion won in April this year. Subsequently, orders were received for the resource recovery facility in Gwangmyeong-si, Gyeonggi-do (KRW 59.9 billion) and the sewer pipe maintenance project in Pocheon-si, Gyeonggi-do (KRW 41.5 billion), but these were all projects ordered by the public. A Taeyoung Construction official said, “Winning the Uijeongbu redevelopment order means that trust has been restored in the private market.”
The fact that Taeyoung Construction is taking steps to normalize appears to have had an impact on this order-taking performance. At the time of application for workout, Taeyoung Construction had implemented all self-rescue plans presented to creditors, including KBD Industrial Bank. Jaguan supports Taeyoung Construction with the proceeds from the sale of ‘Taeyoung Industry’, a logistics affiliate of Taeyoung Group, △promoting the sale of ‘Ecobit’, an environmental affiliate, △providing collateral for and promoting the sale of shares of ‘Blue One’, a golf course operation affiliate, △promoting the sale of ‘Blue One’, a subsidiary in the golf course operation. This includes providing collateral for 62.5% of Pyeongtaek Cyro’s shares.
Taeyoung Construction decided to conditionally sell Taeyoung Industry and Pyeongtaek Silo at the same time at the end of last year. In July, all golf courses owned by Blue One were sold, and EcoBeat was sold to the private equity fund (PEF) IMM Consortium in August of this year. Following the sale of the Taeyoung Building headquarters building in Yeouido, Yeongdeungpo-gu, Seoul, the company is also pursuing the sale of a hotel owned by Taeyoung Construction in Gwangmyeong-si, Gyeonggi-do.
● Capital erosion has escaped, but debt ratio is still high
By securing liquidity through asset sales, etc., Taeyoung Construction’s financial condition has improved compared to the time of the workout. At the end of last year, Taeyoung Construction’s total capital was -561.7 billion won, and stock trading was suspended in March of this year as capital erosion occurred. As capital erosion in the first half of this year (January to June) was resolved, stock trading resumed in October, and Taeyoung Construction’s capital increased to 573.3 billion won as of the end of September. The debt ratio improved from -1,154% at the end of last year to 747% this year, but it is still too early to feel reassured as a construction company’s financial condition is considered at risk when its debt ratio exceeds 200%.
The construction industry believes that the normalization of Taeyoung Construction’s management depends on the performance of restructuring of the PF business, which is the root cause of the crisis. As of the end of September, Taeyoung Construction has 59 PF workplaces and is currently in the process of ‘identifying the rocks’.
The problem is that unless the construction industry revives, restructuring is bound to be slow. An official from Taeyoung Group said, “Whether or not the PF business will be repaired will be the standard for normalizing management after graduating from workouts,” and added, “The biggest variable is whether the stagnant sales market will revive.”
Reporter Kim Ho-kyung [email protected]
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