It was confirmed that Construction Company A, a large company experiencing a liquidity crisis, sent a ‘request for rescue’ to the financial authorities. Construction Company A has excessively increased the payment guarantee for real estate project financing ( PF ) loans in recent years , and there are rumors of bankruptcy due to the recent surge in interest rates and economic downturn. The financial authorities are planning to request the five major financial holding companies, including KB, Shinhan, Hana, Woori, and NH Nonghyup, to provide urgent funds to Construction Company A, while also announcing various measures to open up funding for the construction industry next week .
Construction company A, SOS to financial authorities … Overcome the crisis by receiving loans from major financial holding companiesAccording to the financial sector on the 21st, financial authorities are recently considering measures such as easing regulations on PF lending by securities companies, utilizing REITs ( real estate investment companies) to resolve unsold properties , and establishing PF rate guidelines. These are measures that will put a ‘respirator’ on the construction industry, such as increasing PF loan capacity by lowering the impact of securities company PF loans on soundness indicators and setting rate ranges by considering the risk, credit rating, and repayment ranking of individual PF businesses . It is highly likely that some of these measures will be included in the government’s comprehensive real estate measures scheduled to be announced on the 26th.
It is known that this measure was influenced by Construction Company A’s request to the authorities for help resolving the liquidity crisis. An official from the financial sector who requested anonymity said, “Construction Company A visited the Financial Services Commission and the Financial Supervisory Service and asked for help with the logic that ‘if we collapse, all construction companies with lower credit ratings than us will collapse.’” He added, “Measures to be prepared soon.” “It was prepared to save Construction Company A,” he said. Company A’s current credit rating is A- , but if it declares ‘default’ due to failure to repay its debt, construction companies with a lower rating may go bankrupt due to blocked financing channels.
Recently, the top five financial holding companies have launched private sector-led PF projects.It was also discovered that the purpose of considering a plan to create a business restructuring fund was to ‘save Construction Company A.’ In fact, Construction Company A recently put out a fire by receiving over 100 billion won in funds from two of the five major financial holding company affiliates.
A crisis arises due to unreasonable business progress… Payment guarantee amount of more than 4 trillion wonConstruction Company A ran into a crisis after growing its related businesses excessively since just before 2020, when the real estate market was good. In order to jump into a self-implementation (development) project or be selected as a construction company, the amount of project financing ( PF ) loan payment guarantee has been increased by nearly eight times. In particular, due to the large proportion of local businesses, they took a direct hit after the real estate market collapsed last year.
Construction Company A’s PF loan payment guarantee , which is a ‘contingent liability’, amounts to 4.324 trillion won as of the end of June this year. In 2015, the PF loan payment guarantee amount was only 546 billion won, but it has increased by nearly 4 trillion won in eight and a half years. Of these, 217 billion won worth of maturities are due at the end of this month, and 242 billion won worth are due at the end of December. If the maturity of the PF loan is extended or it is not refinanced smoothly in the financial market, Construction Company A must take on the burden. In the middle of this month, Construction Company A directly purchased PF loan securitized securities worth 153 billion won after its real estate implementation subsidiary failed to refinance it. Afterwards, the maturity of the PF loan guaranteed by Construction Company A is scheduled to return one after another, including KRW 899 billion in 2024 and KRW 192 billion in 2025.
The unreasonable self-implementation of the메이저사이트 project hindered Construction Company A. The project to create a tourist complex in the southern part of Gangneung with a total project cost of 1.53 trillion won and the Gumi Flower Garden private park with a total project cost of 1.2 trillion won through subsidiaries and affiliated companies has not yet begun. In addition, projects such as the 1st to 3rd office development in Seongsu-dong, Seoul (KRW 960 billion), the residential-commercial complex in Yucheon-dong, Daejeon (KRW 560 billion), the Novotel Hotel in Doksan-dong, Seoul (KRW 380 billion), and the 6th general industrial complex in Cheonan (KRW 370 billion) have not begun construction. tied up Among these, local businesses are concerned that the period of non-commencement will be prolonged as the real estate market has frozen due to rapid increases in interest rates, labor costs, and raw material prices. As it is a self-implemented project, if it fails, the loss will be passed on to Construction Company A.
Construction company A is busy seeking funds. After borrowing 400 billion won from an American private equity fund ( PEF ) management company last January, the company signed a financing contract worth 280 billion won with a large securities firm in March. This month, it also borrowed 190 billion won from two banking securities firms. Accordingly, as of the end of June, Construction Company A’s long-term borrowings had increased to 1.578 trillion won. At the same time, the debt ratio reached 462%. Even this is assessed to be insufficient to cover the enormous amount of funds required. Another financial official who requested anonymity said, “In order to borrow money, Construction Company A has put up land for its business site in Bucheon, Gyeonggi Province, which is considered valuable, and even its Seoul office building,” adding, “The money borrowed so far will not be enough to finance the necessary funds this year.” said.
The financial sector is A Construction Company ( A-) and are closely watching construction companies with similar credit ratings. Daewoo Engineering & Construction · Shinsegae Engineering & Construction (A), DL Engineering & Construction · SK Eco Plant ( A- ), Gyeryong Construction · Dongbu Engineering & Construction · Hanyang · HL Halla ( BBB +), Hanshin Engineering & Construction · IS Dongseo · Ssangyong Engineering & Construction · Isu Engineering & Construction ( BBB ), etc. Many of the well-known construction companies have jurisdiction. Among these, construction companies that do not belong to large conglomerates and therefore have no backing could collapse if the A Construction Bowl crisis occurs. In fact, Kumho Engineering & Construction, which was seeking urgent funds in a cold market, recently raised 10 billion won through unsecured private loans with an interest rate of close to 10% per annum. Earlier this month, Kukwon Construction, which was in the top 15% of construction capacity evaluations in 2022, was finally processed for bankruptcy.
Background to the review of some PF measures by Financial Group B, which was bitten by Construction Company A ?Among the PF measures being considered by the financial authorities, there is a plan to prepare indirect support measures through securities companies. This is a way to encourage more PF loans to be executed by lifting soundness regulations on securities companies. Currently, securities firms must reflect the entire amount (100%) of the PF loan granted as the net capital ratio ( NCR ) risk value, but this ratio is likely to be lowered to 8-32%.
It is rumored that B Financial Group is behind this. B Financial Group is carrying out large-scale real estate implementation projects across the country together with Company A. A representative example is the ‘Baekhyeon MICE Urban Development Project’ in Bundang-gu, Seongnam-si, Gyeonggi-do, with a total project cost of 6.3 trillion won. This business consortium was formed led by B Financial Group, and Construction Company A holds a 30% stake. If Construction Company A falters, Financial Group B also suffers considerable damage. An official in the securities industry said, “We understand that powerful figures from the Financial Services Commission, Financial Supervisory Service, and Blue House, who have been recruited by B Financial Group in recent years, are playing an important role.”
In some quarters, criticism is raised that the financial authorities are giving preferential treatment to certain companies that have succeeded in ‘rescue lobbying’ by spending government money on them. Another securities industry official pointed out, “If small and medium-sized securities companies excessively increase lending after NCR deregulation, insolvency may increase again,” and “Attempting to give preferential treatment to certain companies may have the side effect of increasing systemic risk. ”