Taeyang E&C, the No. 3 builder in Daegu by construction capability evaluation, applied for corporate rehabilitation proceedings despite posting 22.6 billion won in operating profit last year. It took over unsold dwellings and retail units in lieu of construction payments, tying up cash, while also being burdened by project financing (PF) guarantees. As of the end of last month, the company held only 270 million won in cash, but its short-term financial liabilities due this year exceeded 180 billion won.
According to the construction industry and the Daegu Bankruptcy Court on the 11th, the court is expected to decide within this month whether to open corporate rehabilitation proceedings for Taeyang E&C, which applied on the 21st of last month. The court summoned Chief Executive Noh Gi-won of Taeyang E&C on the 9th for a representative inquiry.
After the inquiry, Noh said, "I believe it is our duty to do our best in the given circumstances to minimize damage," and added, "I apologize for causing concern in the local community."
Taeyang E&C is a mid-sized Daegu-based builder known for its apartment brand "Taeyang Honors." In this year's Ministry of Land, Infrastructure and Transport construction capability evaluation, it ranked 67th nationwide. Among builders headquartered in Daegu, it placed third after HS Hwasung and Seohan Engineering & Construction.
On operating performance alone, it did not appear to be a company that would immediately apply for rehabilitation. Taeyang E&C posted 323.1 billion won in revenue, 22.6 billion won in operating profit, and 15.8 billion won in net profit last year. Compared with 2024, revenue fell 32.5% and operating profit dropped 61.8%, but it remained in the black.
The problem was cash. As of the 27th of last month, the company's funds, including ordinary deposits, totaled about 270 million won. As of the end of July, unpaid wages to executives and employees also reached 5.063 billion won. By contrast, short-term financial liabilities due this year were found to exceed 180 billion won.
As of the end of March, book-value assets stood at 451.6 billion won, higher than liabilities of 320.9 billion won. However, the company was said to have told the court that if it reflected losses on hard-to-collect receivables and PF guarantee obligations, it could effectively fall into capital impairment. It recorded a book profit, but lacked cash to repay maturing debt.
The liquidity crisis began with unsold dwellings in the Daegu and North Gyeongsang housing projects. As presales slumped, Taeyang E&C received unsold apartments and retail units from developers instead of cash for construction payments. "Nampo Port Taeyang Honors" and "Taeyang Honors Premier" are representative examples.
As the real estate market slumped and these assets failed to sell, inventories surged. Inventories, which were 119.6 billion won at the end of 2024, rose to 180.5 billion won at the end of last year, up 51% in one year. Of that, 124.9 billion won, about 69%, was pledged as collateral for borrowing fund from financial companies, constraining fundraising.
The burden of PF guarantees and weak in-house development also piled on. In connection with the landfill facility project at the Wolsong General Industrial Complex in Goryeong, North Gyeongsang, about 110 billion won in PF guarantee burden arose. The Sacheon IC integrated distribution and commercial complex project in South Gyeongsang, in which Taeyang E&C invested 49% equity and joined as developer and builder, also faced sluggish land sales, leading to roughly 100 billion won in guarantee risk and unpaid construction receivables, according to reports. As the company directly acquired unsold land, its cash position worsened.
In the local construction industry, there are concerns that Taeyang E&C's rehabilitation filing could spill over to partner firms and government-ordered construction sites. Daegu City, while monitoring the rehabilitation process, decided to apply the "direct payment of subcontract fees" system under which project owners pay subcontractors directly at public construction sites. If construction is disrupted, it will also consider appointing alternative contractors.
Financial institutions are reviewing support measures for partner companies facing temporary cash shortages due to Taeyang E&C's rehabilitation filing. The Financial Supervisory Service and local construction associations also plan to assess the cash conditions and damage at construction sites.
Daegu Mayor Choo Kyung-ho said, "Taeyang E&C needs to carry out responsible self-rescue measures," adding, "We will concentrate all our capabilities to prevent this situation from spreading into difficulties for the entire local construction industry."