Taeyoung Engineering & Construction headquarters in Seoul / Yonhap

Troubled mid-sized builder Taeyoung Engineering & Construction (E&C) agreed to lay off 22 senior executives and cut salaries by up to 35 percent for the remaining ones, as part of self-rescue efforts to facilitate a corporate debt workout program, according to the firm's main creditor, Friday.

Last month, the founder of Taeyoung Group and his son resigned from their positions as corporate board directors within the construction firm. Also, employees of the company will have their salaries frozen until 2026.

The developments fuel optimism that the country's 16th-largest builder by construction capacity could achieve a net profit this year.

According to main lender Korea Development Bank (KDB), the measures are expected to reduce the builder's operating expenses to 96.9 billion won ($69 million) this year, down from 126.4 billion won in 2023. Labor costs will be cut to 38.2 billion won from 45.7 billion won over the same period.

At a shareholders' meeting last month, Taeyoung Group founder and honorary chairman Yoon Se-young and his son, Yoon Suk-min, were formally relieved of any titles they held at the construction firm, thus stepping down from their official roles within the company.

Their roles will be limited to the management of TY Holdings, the builder's holding firm. The group founder was elected as the board chair of the holding firm, with the primary aim of ensuring responsible management in the short term. However, he will not actively exercise managerial control within the holding firm.

Friday's announcement represents the most recent development in the months-long debt workout process initiated in January, prompted by the builder's default on a project financing loan.

The KDB-led creditors discussed the outcome of due diligence and the future course of debt restructuring, Thursday. Specifics will be finalized April 30.

They agreed to a plan to reduce the stakes of the builder's major shareholders by a ratio of 100 to 1, while the ratio for minority shareholders will be 2 to 1.

The builder's 400 billion won in loans granted before the workout filing will be converted to shares. The remaining 334.9 billion won extended after the workout filing will be converted into hybrid securities.

Half of its unsecured bonds, to the tune of 239.5 billion won, will be converted into bonds. The repayment of the remaining half will be deferred for three years at a borrowing rate lower than the current 3 percent.