Cwrt Shinil Administration… Concern about the bankruptcy of medium-sized construction companies

Shinil is a comprehensive construction company established in 1985 in Jeonju, North Jeolla Province. In 2006, it continued to grow, becoming 57th in the buildability evaluation rankings. However, in 2007, unreasonable business expansion and sales failure continued, and the final bankruptcy was processed. It was bought by GNS in 2011 and went through normalization procedures. Last year, it was ranked 113 nationwide in the building capacity evaluation ranking.

It is said that Shinil has recently been having difficulty recovering money from his large business sites due to the collapse of the real estate market and the increase in unsold sales. On the construction site, the cooperative and the developer delayed putting money into action, and the financial company was noisy with additional loans. An official from Shinil explained, “Recently, we were unable to collect the construction cost on the business site, and it was difficult to even get a loan.” At the end of last year, Shinil’s unclaimed construction payments amounted to 12.4 billion won.

Shinil is built at 11 business sites across the country, including ‘Bangbae Shinil Happy Tree’ in Seocho-gu, Seoul and ‘Yeouido Shinil Happy Tree’ in Yeongdeungpo-gu, Seoul. It is very likely that large businesses will be hit by this application for a court receiver. In addition, because he went through the rehabilitation process once, the burden on the site is sure to be greater. A person in charge of the site said, “I know that many of the sites have suffered because repairs were not done properly in the past during the rehabilitation process.”

The increasing risk of bankruptcy of construction companies

Since the second half of last year, medium-sized construction companies that support the domestic real estate market have applied for a court receiver, and rumors of a bankruptcy crisis are spreading.

After the real estate project financing (PF) market crunch started last year, Woosuk Construction, ranked 202 in the construction capacity evaluation, applied for a court receivership. The crisis was not avoided due to the overlap between raw material price increases and the financial crisis. Subsequently, Dongwon Industrial Construction, ranked 388, and Daewoo Shipbuilding & Marine Engineering, ranked 83, went bankrupt. This year, H&INC, ranked 133, and Daechang Enterprise, ranked 109, also entered rehabilitation procedures.

The situation is more serious for small and medium construction companies outside the top 300 in the construction capacity evaluation. After Inter-Burgo Construction, which had a joint guarantee with the developer, ran into financial difficulties, ‘Janggi-dong Inter-Burgo’ in Dalseo-gu, Daegu, is looking for a successor construction company. However, as no one took part in the offer, they recently raised the amount of the offer. Jeonbuk Gimje ‘G5 Station Apartment 2nd’, which is being built as a private rental apartment, is also looking for a new construction company as the construction company, Jiin Construction, went bankrupt in April.

In the industry, many construction companies continue by using high interest rate bonds or selling land they own, so the number of cases applying for corporate rehabilitation can increase sharply. An official from the construction industry explained, “Even construction companies in the top 100 are not able to overcome financial difficulties.”

Reporter Yoo Oh-sung osyoo@hankyung.com