Ssangyong Engineering & Construction, beset by the housing market slump and a feud between its shareholder and creditor, is scheduled to file for a corporate workout process this week.
The process refers to a company requesting its creditor banks for a payment delay or partial debt relief, in exchange for amending its financial structure.
The nation’s No. 13 builder has a series of promissory notes and bonds amounting to 60 billion won ($55 million) whose maturity ends this Thursday, while facing a liquidity shortage, according to officials.
Ssangyong E&C’s net loss amounted to some 400 billion won last year, snowballing from 157 billion won a year ago. This constituted an erosion of its 149 billion won capital, indicating that it is unable to pay off its debt even if it sells all of its assets.
The company also has to improve its capital base by the end of March this year to avoid delisting by the stock market operator Korea Exchange, which recently suspended the trading of its shares.
The builder claimed that its high-potential overseas market remained intact, and that the current crisis might be overcome through rehabilitation.
The outlook, however, is still uncertain due to the ongoing blame game between Ssangyong’s creditor banks and the state-run Korea Asset Management Corp.
Last week, KAMCO handed over its shareholdings to the state-run Korea Deposit Insurance Corp. and other creditors.
Shortly before doing so, KAMCO demanded that the company’s chairman Kim Suk-joon step down and take responsibility for the financial fallout.
“Based on figure analyses, the management evaluation committee concluded that Ssangyong E&C’s board of directors achieved poorly,” said an official of KAMCO.
“Though the recommendation is not binding, such judgment should be respected.”
The given suggestion sparked backlash not only from the distressed company but also from its creditors.
“CEO Kim plays an indispensable role in winning overseas construction orders, and his dismissal at this point in time is not at all feasible,” said a Ssangyong E&C official.
“KAMCO is only trying to shift the responsibility to the management and avoid the blame that it neglected its duty as state-run shareholder.”
KAMCO was also reproached for failing to sell the company before the financial crisis of 2008.
Creditor banks, too, criticized the state-run asset manager for stepping out of the Ssangyong E&C business without consenting to debt-for-equity swaps to alleviate the financial burden.
Despite the escalating strife, the builder is currently carrying out 17 construction projects worth some $2.6 billion in eight countries, according to officials.
By Bae Hyun-jung (
tellme@heraldcorp.com)
