Creditors of debt-ridden Taeyoung Engineering & Construction Co. voted Thursday to allow the ailing builder to move forward with a debt restructuring program.

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

The state-run Korea Development Bank (KDB) and other creditors held a meeting earlier Thursday to vote on whether to allow Taeyoung to begin debt restructuring.

While voting is set to continue until midnight, financial sources said conditions have already reached beyond the required level to allow Taeyoung to proceed with the program.

According to financial regulations, over 75 percent of creditors of a company are required to agree in order for the firm in question to move forward with a debt workout program.

The KDB, the builder's main creditor, now has to draw up a detailed restructuring plan to improve Taeyoung's financial structure and inject liquidity, which will be put to a vote at a creditors meeting in April to continue with the restructuring program.

Earlier this week, Yoon Se-young, founder and honorary chairman of Taeyoung, presented a fresh self-rescue measure, saying that he would put shares of terrestrial TV network SBS and TY Holdings up as collateral if needed.

TY Holdings is a holding company of the builder, and SBS is a cash-generating affiliate of Taeyoung Group.

The approval of the Taeyoung workout is expected to alleviate concerns around what could have been a domino effect crisis involving the construction industry's project financing loans.

Despite the decision, Taeyoung needs to secure its own operating funds, including labor and construction costs, estimated to exceed over 500 billion won (US$379.8 million), until a final restructuring plan is confirmed in the coming months.

Taeyoung has been suffering from a liquidity shortage amid high interest rates and a slumping property market, and its outstanding PF loans came to 3.2 trillion won.

Real estate PF loans have emerged as a major risk factor for the country's financial sector and the overall economy. The government has vowed to expand liquidity supply programs from the current level of 85 trillion won, if needed.