Embattled Tong Yang Group needs 800 bln won for revival

Embattled Tong Yang Group, the country's 38th-largest conglomerate, would need 800 billion won (US$745 million) to tide over the current cash shortage and normalize its business, a local credit appraiser said Tuesday.

The outlook came as the group has been suffering from cash shortages due to a slowdown in its building and service businesses, and it needs to cover debts worth 1.1 trillion won due to mature within this year.

"Tong Yang Group needs at least 700 to 800 billion won to deal with the crisis," said Ahn Young-bok, an official from NICE Investors Service Co.

"It must place top priority on settling maturing debts of Tong Yang Leisure Co. and Dongyang International, as financial troubles in such semi-holding firms can have an adverse impact on the group as a whole," Ahn added.

Tongyang Inc., a de facto holding company of the group, saw its debt-to-equity ratio reach 650.6 percent at end-June, and its affiliates Tong Yang Leisure and Dongyang International landed on a cash-crunch as of end-August.

Meanwhile, the group's creditor banks are showing signs of reluctance in offering financial support, with some of them saying it has never considered helping the company.

Creditors' reluctance comes after Orion Corp., a major confectionery maker, refused to provide loan guarantee for some fresh bonds Tong Yang will sell in a bid to refinance its debts.

Tong Yang Group was created in the 1970s as a cement manufacturer by late founder Lee Yang-gu, before growing into a conglomerate with 31 affiliates under its wing. Orion was part of Tong Yang Group until it split from its parent firm in 2001. (Yonhap News)