[THE INVESTOR] The state-led Korea Development Bank on Jan. 31 announced that it has inked a temporary deal with Korea’s largest shipbuilder Hyundai Heavy Industries to sell off debt-ridden Daewoo Shipbuilding & Marine Engineering amid signs of turnaround.
KDB Chairman Lee Dong-gull
DSME set to complete debt-for-equity swap with bondholders
Creditors plan W3.4tr equity swap for DSME
The major creditor and shareholder of the nation’s No. 2 shipmaker signed a memorandum of understanding with HHI after its board of directors approved the proposal to privatize DSME through an all-stock deal.
HHI had expressed its intent to buy a majority stake in DSME on Jan. 30.
KDB currently owns 55.7 percent stake in DSME, with the stocks valued at some 2.2 trillion won (US$1.98 billion).
HHI will acquire the entire shares through KDB’s contribution in kind and capital increase, according to the policy bank. Considering the value of the shares, the acquisition will mark the biggest deal in shipbuilding industry to date.
The sell-off deal is too intricate to go through a competitive open bidding process, KDB Chairman Lee Dong-gull told reporters at a press conference, elaborating on the reasons for the closed-door deal with HHI.
“(KDB) has shared a common understanding in the need to restructure (DSME) with HHI, a company dedicated to the shipbuilding industry, so we chose it as our preferred bidder.”
Lee added he is still open to talks with domestic rivals such as Samsung Heavy Industries.
KDB said in a press release it had pursued a downsizing and sale of offshore plants for restructuring DSME.
DSME’s debt-equity ratio shrank to 222 percent as of end-September, from 5,544 percent in 2016. Also in 2017, the company generated an operating profit of 733 billion won, a turnaround from operating losses for five consecutive years since 2012. KDB expects its operating profit to surge to 1 trillion.
KOSPI-listed DSME shares rose 2.5 percent on Jan. 31.
By Son Ji-hyoung (firstname.lastname@example.org)