TAEYOUNG E&C, which is undergoing corporate restructuring (workout), has completed the project financing (PF) for the Uijeongbu officetel project. In the normalization process of the PF project, it liquidated the business sites in the bridge loan (short-term loan before construction) stage.
Following the liquidation of the business sites, 143 billion won of the 450 billion won guarantee debt provided by TAEYOUNG E&C for the Uijeongbu officetel project has materialized. TAEYOUNG E&C plans to reduce its liabilities by repaying this debt with shares.
With this liquidation, TAEYOUNG E&C has completed the construction or liquidation of about 40% of its major PF business sites, accelerating corporate restructuring efforts.
According to TAEYOUNG E&C on the 4th, the company held a board meeting on the 28th of last month and decided to conduct a capital increase through a third-party allocation method. The recipient is 'IPRO JeSahCha,' a liquidity firm of Kyobo Securities. The newly issued shares amount to 3,093,857 common shares.
This capital increase is in response to the materialization of the guarantee debt for the Uijeongbu officetel project. The Uijeongbu officetel project is a PF project where TAEYOUNG E&C builds an officetel at 498-2 Uijeongbu-dong, Uijeongbu City. TAEYOUNG E&C is providing a guarantee debt of 450 billion won for this project. The main lenders for this project are the liquidity special purpose corporation (SPC) Project T.Y. and Yujoongjae Palcha.
The materialization of the guarantee debt for the Uijeongbu officetel project is due to TAEYOUNG E&C deciding to withdraw from this project during the corporate restructuring process. TAEYOUNG E&C established a liquidation plan for its major PF business sites when the workout began last year. The Uijeongbu officetel project has been following this liquidation process.
TAEYOUNG E&C will repay the debt it has taken on due to the liquidation of the business sites through a capital increase method. In simple terms, this means paying off the debt with shares instead of money. IPRO JeSahCha will receive shares worth 71 billion won by applying a discount rate to the debt amount of 143 billion won. The balance of the guarantee debt will follow the liquidation process.
According to the minutes of the board meeting, TAEYOUNG E&C explained that "the issuance of new shares is conducted in lieu of repayment of debts to the bond financial institutions" and stated that it would "offset the debt against the new shares' subscription debts."
Furthermore, TAEYOUNG E&C added that "when bond financial institutions issue bonds to convert loans into equity as part of debt restructuring, the company and financial creditors determined the issuance price not limited by discount clauses through consultations."
As the liquidation of the struggling PF business sites is finalized, TAEYOUNG E&C's financial burdens are expected to lessen. A spokesperson for TAEYOUNG E&C noted that the capital increase due to the materialization of the guarantee debt for the Uijeongbu officetel project is "part of the liquidation process for the PF business sites, and we expect that this will stabilize our financial structure through liability reduction and capital increase."
Currently, TAEYOUNG E&C's PF business site liquidation is being carried out according to its corporate restructuring plan. About 40% of its major PF business sites have been completed or liquidated. Among 60 major PF business sites, 36 have been classified as completed or ongoing, and as of the end of July, 16 business sites have been completed. 24 business sites have been classified as having replaced construction companies or liquidated, of which 7 have completed this process.