S. Korea to expand liquidity supply programs over Taeyoung E&C's workout application

▲ Finance Minister Choi Sang-mok (3rd from L) speaks during a meeting with financial policymakers in Seoul on Dec. 29, 2023. (Yonhap)

Taeyoung workout-govt response

S. Korea to expand liquidity supply programs over Taeyoung E&C's workout application

SEOUL, Dec. 29 (Yonhap) -- Finance Minister Choi Sang-mok said Friday that the government is ready to expand liquidity facilities to minimize the potential impact of Taeyoung Engineering & Construction Co.'s debt workout application on the financial market and the wider economy.

On Thursday, the mid-sized builder applied for a debt-restructuring program after suffering from a liquidity shortage due to PF loans amid a property market slump.

"The creditors, centering on the main creditor Korea Development Bank, will discuss ways to normalize Taeyoung's management based on its intensive self-rescue efforts. The government and the Bank of Korea will make all-out efforts to minimize its impact on the economy and the financial market," Choi said during a meeting with economic policymakers.

The meeting brought together Bank of Korea Gov. Rhee Chang-yong, Kim Joo-hyun, the chair of the Financial Services Commission, and Lee Bok-hyun, chief of the Financial Supervisory Service.

Currently, the government operates liquidity supply programs of 85 trillion won (US$65.96 billion) as a tool to stabilize the financial market, and it "will expand the programs further, if needed, to brace for possible market volatility in a preemptive manner," Choi said.

The government set aside 50 trillion won for liquidity facilities in October last year in an effort to calm market jitters over an impending liquidity and credit crunch surrounding the Legoland amusement park, and the amount has since risen to 85 trillion won.

Taeyoung E&C's workout application is feared to have repercussions on local construction companies with high exposure to real estate PF loans.

Local construction companies have been reeling from sluggish apartment sales stemming from high interest rates, combined with soaring prices of construction materials.

Industry watchers voiced concern that nearly 23 trillion won in PF loans could turn sour amid the slumping housing market next year. As of end-September, the country's total PF loans were estimated at 134.3 trillion won.

Delinquency rates of real estate PF loans have recently been rising due to the sagging housing market, stoking concerns over the financial soundness of highly exposed borrowers and the stability of the overall financial system.

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