Daewoo Shipbuilding & Marine Engineering received 2.9 trillion KRW (about 2.6 billion USD) rescue package from the South Korea’s finance regulator and state-owned creditors. The Financial Services Commission approved debt restructuring plan for the finance-troubled shipbuilder, which will help them to repay its debts and prevent a bankruptcy. The shipbuilder’s main creditors are Korean Development Bank and the Export-Import Bank of Korea, who will provide the funds via additional loans and swap about 1.6 trillion KRW of debt to equity, as well as extend bond maturity for up to five years as a precondition for the injection of new funds.
“Despite self-rescue efforts by the company, reduced orders amid industry-wide recession, weak oil prices and delay in delivery of drillships have resulted in liquidity risks”, said the CEO of Korea Development Bank, Lee Dong-geol. “The shipbuilder may face bankruptcy in April unless special measures are taken”, added he.
Daewoo Shipbuilding & Marine Engineering had significant difficulties repaying corporate bonds maturing this year worth 940 billion KRW, including bonds maturing April worth 440 billion KRW.
The financial regulator and the main state-owned creditors said their latest decision is based on the estimated damage of 59 trillion KRW, which possible banktruptcy of DSME will affect the country’s economy.
A new set of capital will be injected only if all stakeholders – policy lenders, private creditors, the company and the labor union – agree to fully share the burden. If stakeholders failed to agree on voluntary debt restructuring, DSME would turn to an alternative solution of so-called “pre-packaged plan” with creditors’ consent. This solution is a kind of court receivership that combines advantages of a court-led rehabilitation process and a creditor-led debt workout.
Daewoo Shipbuilding & Marine Engineering Co is the fourth largest shipbuilder in the world and one of the “Big Three” shipbuilders of South Korea (including Hyundai and Samsung).