[딜사이트 김현진 기자] As Taeyoung Construction applied for a workout, it appears that the fallout will also affect securitized securities. As credit rating agencies downgrade Taeyoung Construction’s credit rating, the credit ratings of securitized securities are also being downgraded one after another.
According to the construction industry on the 2nd, Korea Credit Rating lowered the credit rating of Taeyoung Engineering & Construction’s unsecured bonds from ‘A-‘ to ‘CCC’. The credit rating of the commercial paper (CP) issued by Taeyoung Construction was also downgraded from ‘A2-‘ to ‘CCC’. This is because Taeyoung Construction applied for a workout on December 28, 2023.
As Taeyoung Construction’s credit rating was downgraded, the credit rating of the securitized securities provided by the company as a guarantee was also downgraded. In March 2023, the credit rating of the 3rd electronic short-term bond (ABSTB) worth 60 billion won issued by a special purpose company (SPC) called Alpiosanjcha was downgraded from ‘A2-‘ to ‘C’ rating.
The ABSTB was issued to promote the apartment complex development project in Segyo District 2, Osan. As Taeyoung Construction participated as a construction company, it provided the special purpose company (SPC) with the obligation to replenish funds and assume debt in case of nonperformance.
The credit rating of the 30 billion won asset-backed commercial paper (ABCP) issued by SPC Rotation Third was also downgraded from ‘A2-‘ to ‘C’. This ABCP was issued to proceed with a project to build urban housing, officetels, and neighborhood living facilities in Cheonho-dong, Gangdong-gu, Seoul, and Taeyoung Construction signed a letter of commitment to replenish funds and conditionally assume debt.
In addition, the credit rating of the 44 billion won asset-backed loan (ABL) issued by TYD Jeil Motor to proceed with the project to develop a knowledge industry center in Guro-gu, Seoul was also adjusted from ‘A-‘ to ‘CCC’.
The credit rating of these securitized securities was downgraded because Taeyoung Construction applied for a workout. As the credit rating of Taeyoung Construction, which provided guarantees for the securitized securities, was downgraded, the credit ratings of the related securitized securities were also adjusted to the same level.
Generally, if the credit rating of a securitized security is lowered, the interest rate is also adjusted upward upon refinancing. A financial industry official explained, “Interest rates ultimately move depending on credit ratings,” and “If the credit rating of securitized securities has been downgraded, interest rates will rise upon renewal or refinancing, and financial costs will inevitably increase.”
However, in the case of Taeyoung Construction, since its credit rating was adjusted due to the workout, there are predictions that the interest rate may actually be lowered through consultation with creditors. Another financial industry official said, “If you look at the rating alone, the interest rate is bound to rise, but in the case of Taeyoung Construction, the situation is a little different. Creditors also have to think about recovering the principal in the end, and if they take this into consideration, they will lower the interest rate or extend the maturity rather than raise it.” “It might be possible,” he said.
It is predicted that the market impact related to Taeyoung Construction’s workout will be limited. Jeong Hye-jin, a researcher at Shinhan Investment & Securities, predicted, “Considering the limited scale of exposure to Taeyoung Construction and the government’s quick support measures, the market impact will be limited.”
Jo Jeong-hyun, a researcher at IBK Investment & Securities, also said, “Under the current situation, construction companies are having difficulty distributing funds compared to other industries,” but also assessed, “As the period of rapid liquidity absorption has passed, the possibility of large-scale refinancing risks like the past in the short term is low.”
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2024-01-02 21:15:13
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