Domestic private equity fund (PEF) management firm JKL Partners' invested construction company Geohung Industries, specializing in steel structures, is entering bankruptcy proceedings due to financial difficulties stemming from project financing (PF) contingent debt.
On the 7th, investment banking (IB) industry sources reported that Geohung Industries submitted a bankruptcy petition to the Seoul Bankruptcy Court the previous day. The company had previously resolved to file for bankruptcy due to insolvency during a board meeting on the 5th.
Geohung Industries, which specializes in constructing steel structures serving as the foundation for large buildings like office buildings and commercial facilities, started in 1993. JKL Partners acquired the shares of the founder and largest shareholder, former Chairman Lee Gyoo-seok, in 2016.
Up until recently, Geohung Industries was involved in constructing residential-commercial complexes, officetels, and logistics centers in the metropolitan area. It had been responding to the construction industry's recession through operational efficiency, but as the debt burden grew, it ultimately chose bankruptcy.
In particular, as PF contingent debt materialized and the creditor group demanded guarantees for intermediate payments, the company faced financial difficulties. Its current liabilities, which were approximately 7 billion won in 2020, increased to 33.6 billion won in 2022 and 8.4 billion won in 2023.
The company had previously requested additional capital from JKL Partners, its largest shareholder with a 70% equity stake, but it was reported that this was not executed. Geohung Industries' revenue for 2023 was recorded at 113.7 billion won, with an operating loss of 10.9 billion won.
Corporate bankruptcy is regarded as a final procedure taken when the management determines that there is no intention to continue the business or that the company is in a situation where it cannot recover. If the court accepts the bankruptcy petition, the enterprise will be closed after the liquidation of assets.
Due to the construction industry recession, as of the 28th of last month, more than 100 general construction companies have reported closing down this year. Including specialized construction companies, the total number of businesses that have reported closure this year has reached 634.
Meanwhile, following the restructuring process of Homeplus, in which MBK Partners invested, the bankruptcy filing by JKL Partners' portfolio company has caused tension in the industry. JKL Partners is reported to have sought understanding from institutional investors.