The local construction industry remains uneasy about the possibility of a chain reaction of insolvencies and defaults by small players, despite Thursday’s approval of engineering and construction firm Taeyoung E&C s debt renegotiation .
Three local ratings agencies are coming under heavy criticism for slashing credit ratings for Taeyoung Engineering and Construction, only hours after the troubled builder filed for debt workout, on Dec. 28 of last year. They are Moody s Investors Service-affiliated Korea Investors Service, Korea Ratings and NICE Investors Service.
A growing number of small brokerages and construction firms have suffered either credit ratings downgrades or lower credit outlook prospects over the past month due mostly to elevated risks associated with real estate project financing, market watchers said Monday.
Fears are mounting of poor growth for local brokerages, fueled by a combined 12 trillion won ($9.1 billion) in project financing risk exposure certain to wipe out bridge loan-tied credit before next June, according to market watchers, Wednesday. A bridge loan is a high-risk, high-interest loan operated mostly by securities firms and savings banks for the short term.
GS Engineering & Construction (GS E&C) is forecast to suffer an additional fall in its stock price and credit ratings, hit hard by its involvement in a series of construction fraud scandals. According to data from the Korea Exchange, GS E&C shares extended a sharp decline of around 26 percent this month alone.