Korea's Taeyoung to sell local hotel to speed up debt workout

South Korea’s Taeyoung Group, which is undergoing a debt workout of its construction unit, is considering selling a four-star hotel and relevant facilities in the Greater Seoul area for more than 100 billion won ($72.9 million) to a local real estate investment firm.  

The midsize conglomerate has selected Seoul-based Starlord Investment Management as the preferred bidder for Take Hotel, a digital content production studio and wedding venue located in Gwangmyeong, about 4 miles southwest of the capital, according to banking sources on Friday.

If clinched, the deal will speed up the execution of the group’s cash-strapped unit Taeyoung Engineering & Construction Co.'s self-rescue plan, which includes selling a 100% stake in Ecorbit Co., a sewage and waste treatment joint venture between KKR & Co. and Taeyoung Group.

Market insiders had raised questions on whether the group could sell the hotel, the studio and the wedding venue together as some potential buyers hoped to acquire the hotel only, while Taeyoung sought to sell all the properties at once.

Taeyoung has decided to sell the hotel and the two other assets together at a price lower than it initially hoped, according to sources.

The hotel has 27 floors above ground and one underground, with 228 guest rooms and internal facilities including a swimming pool, fitness center, restaurants and conference rooms. The building is located a five-minute walk from Gwangmyeong Station, a stop for the express train KTX and a subway line.

SELF-RESCUE PLAN

The construction subsidiary Taeyoung E&C has dipped into complete capital erosion amid a liquidity crunch in the Korean construction sector with high financing costs and stalled building projects. The Korea Exchange has suspended the firm’s stock trading on the main Kospi since March 14.

State-run Korea Development Bank and other creditors to Taeyoung E&C approved its debt workout program on April 30.

It includes selling 60 billion of first-lien bridge loans, collateralized by the construction firm’s office building project in Seongsu-dong, to the country’s leading real estate firm IGIS Asset Management Co.

Taeyoung Group also aims to divest Ecorbit, valued at around 3 trillion won, by the end of this year with UBS and Citigroup as lead managers.

The group accelerates the liquidation of its golf courses, which are under its sports and leisure facilities operator Blueone.

The conglomerate has borrowed 200 billion won from construction firm Hanlim, with collateralization of its golf courses Yongin Country Club and Sangju Country Club. It is also set to sell The Honors Country Club to building materials supplier Gangdong Group for 350 billion won

In efforts to tighten its belt, Taeyoung E&C has decided to sack more than 20 executives including its founder and chairman and cut employee salaries by up to 35%.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Jihyun Kim edited this article.