| Creditors of Ssangyong Engineering & Construction Co., which is under corporate debt workout program, have given up supporting the troubled construction company, pushing to the verge of being delisted from Korea`s main stock exchange.
According to financial industry sources Friday, Ssangyong`s creditors refused to convert 500 billion won (474.2 million U.S. dollars) of debts into equity, a measure needed to prevent the builder to lose all of its capital and remain listed on the stock market. If the debt-equity conversion is not implemented, Ssangyong will have to be delisted due to the capital erosion.
Woori Bank, Ssangyong`s main creditor, asked other creditor banks, including IBK, Shinhan, Kookmin and Hana, to choose between two proposals. One involved the 500-billion-won debt-equity swap aimed at keeping the builder listed on the stock market, while the other called for a 380-billion-won debt equity conversion at the risk of Ssangyong`s delisting. However, none of the banks responded by Friday.
Some people in the financial industry raise the possibility that Ssangyong will be put under court receivership, reflecting pessimism among the creditors over the construction company`s viability. Some argue that creditors have lost their willingness to provide further support for Ssangyong since soldiers` pension fund, also a Ssangyong creditor, provisionally seized the company`s assets in an attempt to recover 123 billion won (11.7 million dollars) in loans earlier this month. Adding to the possibility of court receivership, Woori Bank CEO Lee Soon-woo`s negotiation with Kim Jin-hoon, president of the soldiers` pension fund, went nowhere.
Failure to provide further financial support for Ssangyong could negatively affect the company`s major overseas construction projects. Ssangyong has been named the preferred negotiation partner for a 1.2-trillion-won (1.1 billion dollars) contract to build a metro system in Qatar. Ssangyong`s trouble is also expected to affect its 16 projects in eight countries worth nearly 3 billion dollars in total.
The ailing builder has nearly 60 billion won (57 million dollars) in secured loan of credit sales coming due by the end of this month for settlement with some 1,400 contractors and subcontractors. Creditors` failure to provide further support of Ssangyong could cause a chain of bankruptcies among the contractors and subcontracts.