Government-led debt relief and bailout for South Korea’s Daewoo Shipbuilding & Marine Engineering Co. (DSME) passed the entire creditors’ meeting on Tuesday, giving the shipbuilder at least a year to normalize operations on fresh funding and debt rescheduling.
Under the new bailout scheme, the two state lenders and the shipbuilder’s largest shareholders Korea Development Bank (KDB) and the Export-Import Bank of Korea (Korea Eximbank) will inject a fresh funding worth 2.9 trillion won ($2.5 billion) to the shipbuilder early next month.
The due dates on corporate bonds will be pushed back by three years, allowing the shipbuilder use 400 billion won left over from the 4.2 trillion won worth bailout fund it received from state lenders in 2015 for operation instead of paying off debt.
Similar relief must be approved by commercial paper holders, which would be finalized “smoothly” this week, according to Financial Services Commission (FSC) Chairman Yim Jong-yong.
The government has more or less gave an ultimatum to private lenders and bondholders to agree to its prescribed relief scheme or otherwise face greater losses upon another option of placing the company under fast-track prepackaged program.
The fresh 2.9 billion won liquidity would be strictly limited to operational funds. The shipbuilder would have to attract new orders in order to pay off existing debt.
DSME has set its target for obtaining new orders worth $5.5 billion this year and so far secured $1.5 billion worth. It is working on getting delayed payment of 1 trillion won from Angolan state oil firm Sonangol EP for two drill ships. The delivery has been delayed for seven months due to Sonangol’s deteriorating financial health.
The shipbuilder vowed to cut costs by 5.3 trillion last year, of which 3.5 trillion won worth must be materialized by next year.
Jung Sung-leep, CEO of DSME who has offered not to receive any salaries, promised creditors that the company will work to impress them with new orders.
By Chung Seok-woo and Kang Young-woon
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