April 26, 2024

• 

[THE INVESTOR] Creditors of the troubled Daewoo Shipbuilding and Marine Engineering plan to conduct a debt-for-equity swap and other measures, worth 3.4 trillion won ($2.97 billion), to help the embattled shipbuilder, one of the country’s three big shipyards, avoid a potential delisting from the local stock market, industry sources said on Nov. 6.

Last year, the country’s two policy lenders -- the Korea Development Bank and the Export-Import Bank of Korea -- said they would provide a combined 4.2 trillion won worth of financial aid to Daewoo Shipbuilding, which breaks down to 2.6 trillion won from KDB and 1.6 trillion won from the other lender.

So far, the two lenders have provided a total of some 3.4 trillion won in financial support to the shipyard, which will be swapped for Daewoo Shipbuilding stocks.

“Detailed plans will be announced this week,” said a source at the KDB.

Daewoo Shipbuilding’s capital base has eroded due to mounting losses, facing the risk of being delisted from the local stock market.

In the first half of the year, Daewoo Shipbuilding suffered a net loss of 1.19 trillion won with its debt ratio exceeding 7,000 percent.

After the debt-for-equity swap, Daewoo Shipbuilding will seek to reduce its capital base, with the details to be announced later this month, according to the sources.

South Korean shipbuilders have been under severe financial strain since the 2008 global economic crisis which sent new orders tumbling amid a glut of vessels and tougher competition from Chinese rivals.

The country’s top three shipyards -- Hyundai Heavy Industries, Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. -- suffered a combined operating loss of 8.5 trillion won last year. The loss was due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump, with Daewoo Shipbuilding alone posting a 5.5 trillion won loss.

The shipbuilders have drawn up sweeping self-rescue programs worth 10.35 trillion won in desperate bids to overcome the protracted slump and mounting losses.

(theinvestor@heraldcorp.com)