이 기사는 2022년 04월 18일 08시02분 thebell에 표출된 기사입니다

The Seoul Administrative Court on Thursday ordered the Seoul city government to stop a punitive business suspension on South Korean builder HDC Hyundai Development Company over a building demolition disaster that killed nine lives last year, according to legal sources on Thursday. The injunction is effective until 30 days after a court ruling on the main lawsuit.

On March 30, the Seoul city government imposed an eight-month business suspension on HDC Hyundai Development over the deadly collapse of the building at the builder’s construction site in Gwangju, South Jeolla Province in June last year. In response, the company filed the injunction to suspend the punitive order along with a lawsuit to reverse it.

Thanks to the latest court order, HDC Hyundai Development has avoided the risk of immediate early repayment of corporate bonds.

According to a bond contract, an event of default occurs when a supervisory authority imposes a suspension or cancellation of business on a company. HDC Hyundai Development is working hard to persuade investors based on local law firm Kim & Chang’s opinion that the event of default occurs when the business suspension order takes effect.

Investors seem to take a wait-and-see stance to see how the situation will unfold as the company has recently secured a large amount of cash assets.

The court order seems have granted HDC Hyundai Development more than a year until the occurrence of the event of default. It normally took about one to two years for construction companies to actually suspend their businesses following the business suspension order. This is because most of them filed injunction or litigation to stop the order.

The value of HDC Hyundai Development’s corporate bonds that contain the event of default clause due to the business suspension amounted to 690 billion won ($561 million). Of the total, bonds worth 200 billion won will mature this year and bonds worth a combined 170 billion won will mature in July and October of 2023. This means the amount of corporate bonds that must be repaid early due to the event of default triggered by the business suspension could decrease from 690 billion won to some 300 billion won.

Separately, the Seoul city government imposed an additional eight-month business suspension on the company for violating its subcontractor supervision obligations.

According to Article 82-2 of the Framework Act on the Construction Industry, the city government may impose business suspension of less than one year or a penalty surcharge equivalent to up to 30% of the contract price, at most 500 million won, for violation of subcontractor supervision obligations. The company will replace the business suspension order with penalties.

If the additional business suspension order is changed to a penalty surcharge, it won’t trigger the occurrence of the event of default.

HDC Hyundai Development is also facing additional administrative measures in connection with a separate fatal accident that occurred in the same city Gwangju. (Reporting by Ji-hye Lee)