Ssangyong Engineering & Construction Co., Ltd., which was placed under court protection in late December after its creditors decided not to extend their financial support, appears to be returning to normal swiftly.
According to financial industry sources, Ssangyong’s creditors have conducted credit risk evaluations on the 79 subcontractors and suppliers whose revenues involving the construction firm exceeded 10% of their total revenues. The evaluations showed that only five firms warranted corporate restructuring.
Out of the five firms, one was in the process of court protection. The remaining firms need to get into debt workout. As a result, they were undergoing the process of corporate restructuring under the supervision of their creditors.
Some 20 out of 46 firms, which had experienced temporary liquidity problems, are receiving financial support through the Fast Track Program(FTP). The remaining 28 subcontractors were found“healthy” with an A-class status.
Financial industry observers have forecast that with Ssangyong placed under court protection, its 1,500 subcontractors were at the risk of bankruptcy as it was deemed impossible for them to collect 180 billion won of receivables including secured loans of credit sales totaling about 70 billion won.
Against the backdrop of this crisis situation, the Financial Supervisory Service and the creditors immediately launched“credit risk evaluations” on the subcontractors. They also aimed to evaluate the provision of financial support to the subcontractors and their operational status. The creditors were the first to conduct credit rick evaluations on the subcontractors and suppliers of an embattled enterprise.
However, the feared adverse impacts were minimal. The FFS only decided to continue to monitor the situation. Specifically, the service will check whether proper financial assistance is properly being channeled into the subcontractors which experienced temporary liquidity shortages and whether measures to bring their operations to normal are being implemented well.
Consequently, Ssangyong’s domestic and overseas projects, which were feared to be disrupted with the company being placed under court protection, appear to be returning to normal swiftly. Some residential construction projects have halted since late last year. However, there were no new construction disruptions during the past one month, with none of the 18 overseas projects being undertaken by the company having been canceled.
Ssangyong, like many in the construction industry, has been hit hard by the downturn in the sector. However, financial regulators say that initial concerns that Ssangyong's troubles can adversely affect its ability to fulfill contracts have been largely alleviated. Ssangyong E&C, the 16th largest in Korea in terms of construction capacity, has shown its prowess particularly in overseas markets by building such landmarks as the Marina Bay Sands Hotel in Singapore
Meanwhile, Ssangyong has effectively secured three public work projects worth 107 billion won, industry sources said. The sources said the construction projects include two sections of a highway connecting Miryang, a town in South Gyeongsang Province, with the major industrial city of Ulsan, and shoreline maintenance work in Uljin County. The securing of these public work projects invariably can be seen as reflecting the confidence of these clients in the company.”
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