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Taeyoung's debt restructuring on swift course: KDB head

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Korea Development Bank (KDB) Chairman Kang Seog-hoon speaks during a press conference at the bank's headquarters in Yeouido, Seoul, Tuesady. Courtesy of KDB

Korea Development Bank (KDB) Chairman Kang Seog-hoon speaks during a press conference at the bank's headquarters in Yeouido, Seoul, Tuesady. Courtesy of KDB

KDB's relocation presidential initiative
By Lee Kyung-min

The board of Korea Development Bank (KDB) approved the capital reduction of Taeyoung Engineering and Construction (E&C), marking the latest development in the months-long debt restructuring of the troubled building developer, according to the creditor, Tuesday.

"The board's approval of the KDB-led creditors' discussion as well as the due diligence by accounting firms is proceeding without any disruption," KDB head Kang Seog-hoon said during a press conference at the bank headquarters in Yeouido, Seoul. It was held to commemorate the second anniversary of Kang's inauguration.

The creditors agreed to a plan in April 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.

Kang said the relocation of KDB headquarters to Busan will not be revised, despite a fierce backlash from unionized employees at the bank.

"We have long spearheaded structural reorganization and fortified manpower capabilities to prepare for the relocation. The drive was a major pledge of President Yoon Suk Yeol. We will continue to seek cooperation with the National Assembly to advance the relocation."

Kang stressed the need to lift the cap on the lender's legal capital of 30 trillion won ($21 billion), a critical step to bolster the financing of the country's manufacturing and growth drivers.

"The cap of 30 trillion won remained unchanged for the past 10 years, far lower than the minimum of 60 trillion won needed to meet the needs of the country's growth drivers – artificial intelligence (AI) rechargeable batteries and bio sectors."

The state-run lender should not, in his view, solely rely on government financing. This underscores the need for it to enhance its capabilities to increase retained income in order to bolster its capital size.

"The KDB is extremely vulnerable to financial volatilities due to outside shocks, as evidenced by chronically low net-interest-income and return-on-asset ratios. The problem of heavy reliance for equity and assets on shares of state-run energy firm Korea Electric Power Corp. (KEPCO) and HMM, the country's largest shipping firm, will be resolved in the months to come."

The lender aims to generate at least 3 trillion won in stable income, underpinned by regular dividend payouts and diversified investment banking portfolio management.

Kang said the failed sale of HMM will resume with considerations for government marine business policies among other strategic interests.

"The holdings of HMM shares is weighing heavily on the financials of KDB, grounds for us to push for a swift sale again are dependent on market conditions. Also coming into play will be management efficiency concerns."

Lee Kyung-min


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