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Taeyoung increases collateral to secure debt workout

Distressed Taeyoung Group offers TY Holdings, SBS shares as collateral ‘if needed’; KDB says it assesses the proposal ‘positively’

By Im Eun-byel

Published : Jan. 9, 2024 - 15:23

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Taeyoung Group founder Yoon Se-young speaks at a press event at the group's headquarters in Yeouido, western Seoul, Tuesday. (Yonhap) Taeyoung Group founder Yoon Se-young speaks at a press event at the group's headquarters in Yeouido, western Seoul, Tuesday. (Yonhap)

Taeyoung Group, the parent company of debt-ridden Taeyoung Engineering & Construction, said Tuesday it will put up its full stake in TY Holdings and broadcaster SBS as collateral to secure liquidity, responding to demands calling for a higher level of self-rescue plan.

While Taeyoung Group announced some measures to secure the funds to repay the debts of Taeyoung E&C in late December, financial authorities and creditors have called for more effective measures, such as putting up its shares of TY Holdings and SBS.

Taeyoung Group’s ownership family responded to the calls Tuesday, adding new measures into the initial plans by offering the holdings as collateral "if needed."

“We will work to bring back Taeyoung E&C, offering the shares of holdings company TY Holdings and SBS as collateral if needed,” Taeyoung Group founder Yoon Se-young said at a press event at the group's headquarters in Seoul.

Taeyoung Group's ownership family holds 33.67 percent stake in TY Holdings, while the holdings company is the largest shareholder of SBS with a 36.32 percent stake, owning further shares in the broadcaster’s affiliates.

“Taeyoung E&C is going through difficulties due to our greed, and the failure of project financing loan rollovers from high interest rates and the sluggish real estate economy,” Yoon said.

“We will faithfully carry out the self-rescue efforts, more than merely hoping for support from creditors,” Yoon said, responding to authorities' criticism.

But the ownership family’s willingness to provide shares as collateral came with conditions.

“If the previously suggested four self-rescue measures are thoroughly carried out, Taeyoung E&C’s liquidity crunch is likely to be resolved by April,” Choi Geum-rak, vice chairman at Taeyoung E&C, said at the briefing. “If that does not work out due to many variables, the shares of TY Holdings and SBS will be offered as collateral.”

Yet, the firm underlined it will not be putting SBS up for sale, referring to legal regulations related to selling off a broadcasting company.

The state-run Korea Development Bank, Taeyoung E&C's main creditor, welcomed the announcement, adding creditors are assessing the proposal “positively.”

“This will be the starting point where Taeyoung Group and its owners can earn back the trust of the market,” a separate announcement issued by the KDB few hours after Taeyoung Group’s press conference read.

“The main principle of a workout is for Taeyoung Group and Taeyoung E&C to finance the needed funds through a high-level self-rehabilitation plan until a corporate improvement plan is drawn up. Tuesday’s announcement shows that (Taeyoung Group) is willing to adhere to the principle.”

Meanwhile, Taeyoung Group has settled with global private equity fund KKR to sell off its sewage treatment unit Ecorbit. The Ecorbit sell-off is one of four steps in the self-rescue plan previously suggested by the business group.

While Taeyoung needed to earn KKR's approval to sell off Ecorbit, the equity manager gave the green light for the sale, Taeyoung Group said Tuesday. The unit is valued at some 2 trillion to 3 trillion won ($1.5 billion to $2.3 billion).

“KKR promised full cooperation for a sellout and we have signed a contract for a co-sale,” Choi said.

Taeyoung Group’s TY Holdings and KKR each hold a 50 percent stake in the Ecorbit. If the sell-off happens, Taeyoung may be able to secure over 1 trillion won. Yet, Taeyoung is also indebted to KKR, having provided its 50 percent stake in the unit as collateral for 400 billion won in funding from the equity firm in January 2023.

A creditors' meeting is set for Thursday to decide on the launch the debt workout program. Taeyoung Group needs to secure 75 percent approval from the creditors to kick off the debt restructuring process.