Taeyoung Construction’s creditors disagree over development of 700 billion won ‘Gumi Flower Garden’

While Taeyoung Construction’s corporate improvement plan, which is undergoing a workout (corporate improvement work), is about to be approved by creditors at the end of this month, lenders are having differing opinions over the ‘Gumi Flower Garden’ project worth 700 billion won. Korea Development Bank, the main creditor bank, is planning to liquidate the business, but some creditors are demanding resumption of the business through ‘later resale’, saying that the burden of losses will increase if the entire bond is written off.

According to the real estate industry on the 26th, the Gumi Flower Garden development project (Gumi Grand Foret Desian) is classified as ‘liquidation’ in the Taeyoung Construction business site liquidation plan proposed by the Korea Development Bank and is expected to go through the pre-sale process. However, there is wide disagreement as some lenders who provided real estate financing project (PF) funds to the business site are demanding that Taeyoung Construction proceed with the project.

The Gumi Flower Garden development project, divided into complexes 1, 2, and 3, is a large-scale business with a contract amount of 711.5 billion won at the time of the 2022 contract. The developer is GM Park, in which Taeyoung Construction has invested 49.9% of the shares, and in fact, Taeyoung Construction is in charge of implementation and construction. It was a project to develop a park and apartment complexes on an area of ​​690,000 m2 in Doryang-dong, Gumi-si, and was planned to have 21 buildings and 2,643 households in three complexes with 3 floors underground and 40 floors above ground.

However, soon after the sale of the first complex in November last year, Taeyoung Construction’s workout occurred, and the sale rate stopped at about 17%. The Korea Development Bank reflected the response from Taeyoung Construction’s creditors and established a plan to liquidate the business. This is because the sales rate is low and the backlog of unsold units continues in Daegu, so it is believed that recovery of funds will be delayed.

On the other hand, some banks that provided PF loans to the business are demanding that the business continue. This is because the entire amount of the receivable can be written off, increasing the burden of handling actual losses. Currently, Daegu Bank and Gwangju Bank have lent 90 billion won and 100 billion won, respectively, to the Gumi Flower Garden Development Project (Complex 1). Samil PwC, which conducted a due diligence on Taeyoung Construction, estimates that the recovery rate of unsecured claims from creditors is 7% in the case of liquidation and 40.7% in the case of a going concern.

However, even if the project is resumed, considering the serious backlog of unsold units in the Daegu area, it is likely to be resold at a later date rather than continuing construction immediately. Taeyoung Construction is discussing a plan to return the deposit paid to existing contractors through the Housing and Urban Guarantee Corporation (HUG), buy back the land from HUG, and then resume business when the sales market in the Daegu area recovers. Except for Gumi Flower Garden Complex 1, Taeyoung Construction plans to complete construction or replace the construction company for the remaining PF-stage businesses and continue the project safely. Through this business reorganization, asset damage of 355.7 billion won is expected immediately, but liquidity of 878.1 billion won is expected to be secured in the future.

In addition, it was decided to liquidate about half (9) of Taeyoung Engineering & Construction’s bridge loan business sites (20) that have not yet opened. This includes Gumi Flower Garden Complexes 2 and 3, which remain in land purchase status. Ten locations, including the Bucheon military base site, will sell the consortium shares held by Taeyoung Construction and replace construction companies.

Meanwhile, Woori Bank raised an issue with TI Holdings’ debt repayment postponement clause being included in its corporate improvement plan. A Woori Bank official explained, “As the target of the workout is Taeyoung Construction and not TI Holdings, it should be viewed separately,” and “We requested that TI Holdings’ joint debt 3-year moratorium clause be excluded from the agenda.” Woori Bank explained. holds solidarity bonds and unsecured bonds worth 36 billion won and 44 billion won, respectively, in TI Holdings.

Meanwhile, most of the social overhead capital (SOC) projects will continue as is, but the construction rights for GTX-C route section 3 and the consortium shares will be sold. This is due to the judgment that profitability is low as construction costs have increased significantly. The need to invest as much business capital as the shares owned also served as a burden. The size of the stake being sold by Taeyoung Construction is approximately 380 billion won, which is 10% of the total construction cost (3.8 trillion won).

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