IGIS Asset Management Acquires $43M in Bad Loans from Taeyoung E&C

IGIS Asset Management agrees to purchase 60 billion won worth of bad loans from Taeyoung E&C, collateralized by an office building in Seoul's Seongsu-dong neighborhood. The deal is part of a debt workout plan to stabilize South Korea's struggling construction industry.

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Geeta Pillai
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IGIS Asset Management Acquires $43M in Bad Loans from Taeyoung E&C

IGIS Asset Management Acquires $43M in Bad Loans from Taeyoung E&C

IGIS Asset Management, a leading South Korean asset management firm, has agreed to purchase 60 billion won (approximately $43 million) worth of bad loans from Taeyoung E&C, a domestic construction company. The deal, which is part of a debt workout plan, will see the loans collateralized by an office building located in Seoul's up-and-coming Seongsu-dong neighborhood.

Why this matters: This deal highlights the ongoing struggles of South Korea's construction industry and the vital role of asset management firms in stabilizing the sector. The successful resolution of bad loans and stalled projects will be key to restoring investor confidence and revitalizing the industry. The successful resolution of bad loans and stalled projects will be key to restoring investor confidence and revitalizing the industry.

The acquisition is expected to close next month, with IGIS investing 20 billion won in the Korea Asset Management Corporation (KAMCO) fund and an additional 40 billion won in external funds to finance the purchase. The office building securing the loans is situated in Seongsu-dong 2-ga, Seongdong-gu, Seoul, and boasts a total area of 21,420 square meters.

The construction project associated with the loans was suspended because of financial difficulties faced by Taeyoung Engineering & Construction, leading the company to undergo a workout process. IGIS Asset Management's acquisition of the bad loans is part of a broader effort to normalize the project financing (PF) business and provide support to South Korea's real estate industry.

IGIS Asset Management plays a significant role in this deal as one of the five consignment managers of KAMCO's'Real Estate PF Business Normalization Support Fund'. This fund was established to address the challenges faced by the real estate project financing sector, which has been struggling with a surge in non-performing loans and stalled construction projects in recent years.

The acquisition of Taeyoung E&C's bad loans by IGIS Asset Management is expected to provide a lifeline to the troubled construction firm while also presenting an opportunity for IGIS to potentially turn around the fortunes of the collateralized office building. The Seongsu-dong area, once an industrial hub, has been undergoing a rapid transformation in recent years, emerging as a trendy neighborhood known for its cafes, art galleries, and start-up scene.

The deal between IGIS Asset Management and Taeyoung E&C highlights the ongoing challenges faced by the South Korean construction industry, which has been struggling with a prolonged slowdown, tightened regulations, and a sluggish domestic economy. Many construction firms have found themselves saddled with non-performing loans and stalled projects, leading to a rise in debt workout programs and restructuring efforts.

The real estate project financing sector faces difficult times, and the role of asset management firms like IGIS and government-backed entities such as KAMCO has become increasingly vital in providing support and stability. The successful resolution of bad loans and the normalization of stalled construction projects will be key to revitalizing the industry and restoring investor confidence.

The acquisition of Taeyoung E&C's bad loans by IGIS Asset Management serves as a demonstration of the proactive measures being taken to address the challenges faced by the South Korean construction industry. The deal's progression and the Seongsu-dong office building's future taking shape will draw close attention from industry insiders and investors, as it may serve as a bellwether for the broader real estate project financing environment in the country.

Key Takeaways

  • IGIS Asset Management buys $43m worth of bad loans from Taeyoung E&C.
  • The loans are collateralized by an office building in Seoul's Seongsu-dong.
  • The deal aims to stabilize South Korea's construction industry and real estate sector.
  • IGIS will invest $14m, with $29m from external funds, to finance the purchase.
  • The deal highlights the vital role of asset management firms in resolving bad loans.