Seoul, South Korea – Shin Dong-A Construction, a mid-sized South Korean construction company, has filed for bankruptcy, marking the second time in 15 years that the company has sought court protection. The filing comes amid a prolonged slump in the construction industry, with many other builders facing similar challenges.
The company submitted a petition for corporate rehabilitation to the Seoul Bankruptcy Court on January 6th. The decision follows the company's failure to pay a 6 billion won bill that matured at the end of last year.
Shin Dong-A Construction, which ranks 58th in terms of construction capabilities, is known for its "Famile" residential brand. The company has been grappling with a significant number of unsold units in projects such as the Jinju Station New Townhouse in Gyeongnam and a high-rise residential complex near Uijeongbu Station. Additionally, the failure to secure project financing for a townhouse development project in Songsan Green City, Hwaseong, and increasing construction costs have further exacerbated the company's financial woes.
The company's latest financial woes can be traced back to a sharp increase in its debt-to-equity ratio. As of the end of 2021, the ratio stood at a staggering 428.75%, well above the industry's generally accepted range of 100-200%.
Shin Dong-A Construction previously underwent a corporate workout program from 2010 to 2019 due to a capital shortfall. However, the company's recovery was short-lived as the South Korean real estate market began to cool and unsold housing units, particularly in areas outside of Seoul, soared.
The company's bankruptcy filing comes as the number of unsold housing units in South Korea continues to rise. As of November 2022, the number of unsold units reached a four-year high of 18,644.
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