Golden Print [EN]: Chapter 160

Like any other company, the biggest reason for a company’s bankruptcy is usually the interruption of cash flow.

Construction companies often face a tough situation. They typically have low operating profit margins and high debt ratios, making them very sensitive to their financial health. For them, securing funds is as important as any other task.

The more money they can secure, the bigger the projects they can take on. On the other hand, if they run out of funds, the quality and amount of work they can do decreases.

Being able to raise funds is probably the most important thing for a construction company to win projects.

Therefore, when the real estate market slows down, construction companies with little cash on hand face a crisis.

2011 was exactly that kind of year.

Properties that hadn’t been sold started piling up in areas where prices had gone up a lot in 2007 and 2008.

Because of these unsold properties, companies had to offer discounts, and payments from residents were delayed. This made it hard for construction companies to pay back the money they had borrowed to win projects.

Small and medium-sized construction companies with low credit ratings had taken out many special loans called ‘Project Financing’ (PF) loans. These loans weren’t included in their official debt, which became a huge problem and even led to the 2011 Savings Bank Crisis.

As construction companies went bankrupt one after another, even the banks that couldn’t get their money back collapsed.

PF loans are a way of lending money based on whether a project is likely to succeed, rather than lending money based on what a company already owns.

So, if the project fails, the bank has no way to get its money back.

In simple terms, it’s like lending money after looking at a business plan, but the business fails.

Woojin thought, “At the time, it felt like a bolt from the blue.”

Around this time in his past life, Woojin, who worked at Sungjin Construction, experienced this savings bank crisis firsthand, even though he was young.

Sungjin Construction, the company where he had first settled down while working on-site, went bankrupt very quickly, and he lost his job.

What Woojin couldn’t understand back then was that Sungjin Construction wasn’t a failing company.

Unlike other mid-sized construction companies, Sungjin Construction’s finances were strong, and its operating profit margin for the previous year (2010) was not negative.

It was a so-called ‘black ink bankruptcy’. They would have been able to pay back their debts and make a profit if they had received all the payments from the completed projects, but they didn’t receive the money and eventually couldn’t handle it, leading to bankruptcy.

In fact, Woojin didn’t lose much at this time.

Woojin, being just a field staff member, only didn’t receive about a month’s worth of pay, and there was no further loss.

So, when the company went bankrupt, Woojin didn’t have any particular thoughts, except that he felt a little sorry for the unpaid allowance.

However, after getting older and learning how a construction company is run, he understood how Sungjin Construction’s bankruptcy had happened.

“Looking back now, it was a really unfortunate situation. I remember that Sungjin’s CEO was quite a respected person…”

Because of this memory, Woojin was able to think about acquiring Sungjin Construction from the end of last year.

If he was right, Sungjin Construction’s bonds would be on the bond market at a very low price, now that the savings bank crisis had already started.

“Actually, there were some questionable things while investigating Sungjin Construction,” Jintae said.

“What things?” Woojin asked.

“I found out that it was a construction company with a company value of hundreds of billions of won, but you said you were going to acquire it,” Jintae replied.

“You were thinking, ‘How can we acquire it with our capital?'” Woojin asked.

“That’s right. Actually, I didn’t even know if we could get nearly 10 billion won in cash at this point… If it were a normal situation, it would have been absolutely impossible to acquire it with the money we have now,” Jintae said.

Jintae, who conducted the financial investigation of Woorim Company under Woojin’s instructions, learned a lot.

Woorim Company was a special company created by Sungjin Construction to receive PF loans. By investigating its financial status, Jintae was able to understand the hidden crisis of Sungjin Construction.

He was able to see the large debt of Sungjin Construction, which had been hidden by Woorim Company.

Therefore, in this investigation, Jintae was able to roughly understand the plan that Woojin wanted to carry out.

However, because he didn’t know enough, he made some wrong assumptions about how to do it.

“Are you thinking of buying the shares of Sungjin Construction, which is burdened with debt, at a low price?” Jintae asked.

“No, that’s not it,” Woojin said.

“Then what is it?” Jintae asked.

Woojin continued, “What I’m trying to buy is Sungjin Construction’s bonds.”

“Bonds…?” Jintae asked, confused.

“I’m trying to get the bonds that the bank has for Sungjin Construction at a very low price,” Woojin explained.

Bonds, simply put, are the right to receive money.

If there is a 10 billion won bond for Sungjin Construction, you have the right to receive that money from Sungjin Construction.

So, how would Woojin buy that bond at a bargain price?

The answer was in the current situation.

Even if it is a bond that can receive hundreds of billions of won, if the company’s ability to pay has fallen to almost zero, then whether it’s a 10 billion won bond or a 100 billion won bond, it’s no different from a piece of waste paper.

At this point, Sungjin Construction was almost bankrupt.

The moment it goes bankrupt, the bank’s way to receive money disappears.

Even if Woojin cuts the price of the bond, they will have to sell it. It’s more important to get something back than to lose everything.

However, even after hearing all of Woojin’s explanations, Jintae tilted his head, as if he didn’t understand.

“According to what you said, why are we buying that bond?” Jintae asked.

“Huh?” Woojin responded.

“Are you saying that we can recover the bad debt that the bank has judged to be unrecoverable?” Jintae asked.

Woojin wiggled his finger and replied, “No, of course, it’s impossible. What can we do to recover the money that even those nasty bankers can’t recover?”

“Then what are we going to do?” Jintae asked.

“We’re going to take this bond and make a deal with Sungjin Construction,” Woojin said.

“A deal?” Jintae asked.

“To repay the debt with equity instead of money. In the end, it’s like buying equity with bonds,” Woojin explained.

“…!” Jintae exclaimed.

“What did you say was the total amount of bonds you identified?” Woojin asked.

“About 12 billion won,” Jintae replied.

“That’s just right,” Woojin said.

“What is?” Jintae asked.

“With that amount of bonds, I think we can secure enough shares of Sungjin Construction,” Woojin explained.

“…!” Jintae exclaimed again.

“At this point, the equity value of Sungjin Construction has also fallen a lot… With a 12 billion won bond, we can secure at least 50 percent of the shares, right?” Woojin asked.

“Really?” Jintae asked.

“In fact, we can secure enough shares to make Mergers and Acquisitions (M&A) possible,” Woojin said. M&A means acquiring and merging companies to secure management rights of other companies.

Jintae, who was listening to Woojin’s story, felt like his brain was overloading. He understood the overall plan because he had investigated and extracted the data himself, but the details weren’t perfectly clear to him.

So, Jintae asked Woojin about the questionable parts again.

“Then why doesn’t the bank do that?” Jintae asked.

“Do what?” Woojin asked.

“Like you said, the bank can just acquire Sungjin Construction, right?” Jintae asked.

At Jintae’s question, Woojin smiled and shook his head.

“Of course, the bank wouldn’t do that,” Woojin said.

“…?” Jintae responded.

“From their point of view, Sungjin Construction is just a failing construction company. It’s not even the same type of company as a bank… Why would they acquire it?” Woojin explained.

Just as Jintae was about to ask again, Woojin continued, “But we’re different. We’re buying the intangible things that Sungjin Construction has built up so far at a bargain price through bonds.”

“What is intangible value?” Jintae asked.

“Cumulative sales that are at least 10 times more than WJ Studio’s, and various licenses in the construction industry,” Woojin replied.

“…!” Jintae exclaimed.

“In addition, construction professionals and equipment that we don’t have,” Woojin added.

Woojin tapped the table and added, “Sungjin Construction is a company that will be worth hundreds of billions of won again if it overcomes this crisis.”

A pleasant smile appeared on Woojin’s lips.

“Of course, there will be some internal pain until we completely take it over without any problems…” Woojin said.

Only after hearing all the stories up to this point did Jintae, who now had a clear picture in his head, shake his head while sticking out his tongue.

“If it goes as you said, it’s a fully possible scenario,” Jintae admitted.

“That’s right. And we have to make it happen,” Woojin said confidently.

If the acquisition of Sungjin Construction is successful, WJ Studio can become a completely different company.

Until now, the scope of work that WJ Studio could do was limited to small-scale construction mainly composed of interior design, various architectural designs, and design.

Now, it will have quite plausible construction capabilities.

It’s like the owner, Woojin, will have several times more options.

So, Woojin was going to complete this plan no matter what.

“Find a good tax firm, Hyung,” Woojin instructed.

“We have a place we trade with, right?” Jintae asked.

“That’s not going to work. There must be a place that specializes in this,” Woojin insisted.

“Okay,” Jintae agreed.

Jintae, who briefly wrote down Woojin’s instructions in his notebook, spoke again, “Then the next step is to contact the bank that has the bonds of Sungjin Construction?”

Woojin shook his head.

“No, there’s no need to contact them first. If we go in now, we won’t be able to buy it that cheap,” Woojin explained.

“Really?” Jintae asked.

“If we wait a little, it will definitely come out on the market… Let’s bring it when it’s been put up for auction once or twice,” Woojin suggested.

“Okay. Then I should have a meeting with the management support team,” Jintae said.

Woojin nodded and replied, “That’s right. We need to get a lot of advice from financial experts. I’ve drawn a big picture, but I don’t really know the details.”

Woojin, who organized the overall plan with Jintae, immediately called an in-house meeting.

From this day on, Woojin’s schedule, which had been quite relaxed for a while, became tight again.

When he was working on the Sungeun Apartment Association, there was almost nothing that Woojin had to do directly.

But until Sungjin Construction is acquired, the CEO, Woojin, will have the most paperwork to do.

“I still have to do it. It’s the most important event among the things that will happen this year,” Woojin thought.

Despite the fact that he will be busy again, Woojin’s eyes were shining with anticipation.

But one disaster came to Woojin, who had so much to do.

It was the midterm exam that inevitably comes to college students when the cherry blossoms fall.

Thanks to industry-academia cooperation, Woojin got quite a few credits for free, but he couldn’t help but pay attention to some subjects.

In particular, Digongdi, which Woojin was taking most diligently, was a difficult subject with more midterm assignments than several other subjects combined.

So, today, Woojin was leaving work a little early to go to Jayden’s house for this assignment, with Seokhyun, the black knight who would protect him from this disaster.

“CEO,” Seokhyun called.

“Why are you calling me so anxiously? This isn’t even the company,” Woojin responded.

“Isn’t life all about give and take?” Seokhyun asked.

“There must be something coming if there’s something going,” Seokhyun added.

“Hmm…” Woojin hummed.

Seokhyun continued in a subtle voice toward Woojin, who was turning his gaze out the window of the driver’s seat, “I heard a rumor that you made a lot of money this time…”

“It’s a false rumor,” Woojin said, dismissing the idea.

Ignoring Woojin’s reply, Seokhyun continued to speak, “I don’t think it’s time to add a car or so to the company?”

Woojin, who noticed Seokhyun’s dark intentions, sighed deeply.