Creditors of Taeyoung Engineering & Construction on Tuesday approved a massive capital reduction plan designed to support the builder currently undergoing a debt restructuring program.

More than 75 percent of the builder's creditors agreed to the plan to reduce major shareholders' stakes at a 100-to-1 ratio without compensation.

The plan, proposed by Taeyoung's main creditor, Korea Development Bank, earlier this month, also seeks to raise some 700 billion won ($507 million) through debt-to-equity swaps.

"Taeyoung may secure fiscal soundness that will allow it to resume normal order-receiving activities from 2025 by swiftly implementing capital expansion plans that will remove its capital impairment," the state-run KDB said in a press release.

"We have devised a practical and viable corporate improvement plan just four months after Taeyoung E&C filed for a debt restructuring program," it added. "We believe this will create the foundation for the stabilization of the real estate project financing market and minimizing the loss of all interested parties."

Taeyoung, the 16th-largest builder in South Korea in terms of construction capacity, applied for a debt restructuring program in December last year due to a liquidity shortage over real estate PF loans.

Its total assets currently stand at minus 635.6 billion won, indicating a negative net worth in which its outstanding liabilities exceed its assets. (Yonhap)