Ssangyong Construction on brink of bankruptcy

The headquarters of Ssangyong E&C

Ssangyong Construction & Engineering (E&C), one of Korea’s major builders specializing in the construction of high-rises, could go bankrupt if its creditors fail to extend emergency loans by Thursday.

The construction firm is obliged to serve commercial papers worth 50 billion won, which expire Thursday. If the builder fails to meet the obligation, it will be declared insolvent.

Ssangyong is then expected to file for court receivership, halting dozens of ongoing construction projects at home and abroad worth billions of dollars. This will also negatively affect the builder’s credibility and wreak havoc on over 1,400 subcontractors.

“The Korea Asset Management Corp. (KAMCO) has reached an agreement on a 200 billion won emergency loan package in principle with Korea Development Bank and other creditors. But they are having difficulty in narrowing their differences over details,’’ an Ssangyong E&C spokesman said.

He added that unless creditors provide the loan in a timely manner, Ssangyong has no other choice but to declare bankruptcy. “If we receive financial aid from creditors, we will be able to continue normal operations. We urge them to make the right decision as soon as possible.’’

If Ssangyong goes bust, it would deal a serious blow to the country’s construction industry and damage its reputation overseas, the spokesman stressed.

Ssangyong has secured projects worth 7 trillion won at home and abroad. It currently operates 130 construction sites. The firm is also vying to win dozens of construction schemes worth around $9.6 billion.

Ssangyong’s latest financial trouble comes just weeks after KAMCO, the largest stakeholder with a 38.75-percent stake in the builder, failed to conclude sales negotiations with E-Land, which had been selected as the preferred bidder early last month.

The mid-tier conglomerate specializing in fashion and retail offered to buy a 50.02-percent stake for 240 billion won.

However, while conducting due diligence on the builder, E-Land asked KAMCO to take responsibility if Ssangyong’s unforeseen debts are discovered after the sales.

But KAMCO refused such a demand, leading to a breakdown in sales negotiations.

Following the 1997-98 Asian financial crisis, Ssangyong E&C and other Ssangyong Group affiliates faced deep financial trouble under mounting debts. KAMCO and other creditors injected capital to rescue the builder in return for company shares in 1999. Since then, creditors have been attempting to dispose of the company.

However, despite its unstable status, the builder has emerged as one of the world’s leading engineering and construction firm over the past decade.

It has an extensive overseas network and is capable of constructing high-rise structures like the Marina Bay Sands Hotel in Singapore. It has also been undertaking a wide range of infrastructure development projects in the Middle East and other parts of the world. <The Korea Times/Lee Hyo-sik>

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