South Korea’s state-run Korea Development Bank (KDB) won’t look for buyers for Daewoo Engineering & Construction Co. and KDB Life Insurance Co. until it is sure they have gained enough competitiveness.

"Uncertainties from sales talks have only disrupted their operations and hurt corporate value. We will focus on turning the two companies around over the next two years,” KDB Chairman Lee Dong-gull said in an interview with Maeil Business Newspaper on Sunday.

Due to worsening balance sheet by taking in too many money-losing companies, the state lender set a timetable in late 2016 to dispose of equity stakes in 81 out of 132 non-financial units under its arm.

Daewoo E&C and KDB Life Insurance were acquired by the state lender through special purpose vehicles and private equity funds.

KDB Life, formerly Kumho Life that was acquired in 2010 amid the liquidity crisis of Kumho Asiana Group, received more than 1 trillion won ($935.3 million) in public funds. Sales flopped three times due to the saturated life insurance market.

KDB’s track record on turning around troubled companies for sale, however, has been pitiful. Sale of Kumho Tire to Doublestar Tyre is being re-pursued at a significantly shaved price after negotiations last year fell through. Hoban Construction recently withdrew its bid over Daewoo E&C upon discovering massive losses in the power operation in Morocco that translated into a 300 billion won deficit in the fourth quarter statement.

Shares of Daewoo E&C closed Tuesday up 0.36 percent at 5,510 won.

The bank is responsible for a wide range of restructuring from the country’s shipyards to GM Korea, whose majority shareholder General Motors is flagging the possibility of closing the Korean operation unless it receives government support.

In regards to the shipbuilding industry, Lee said Korean shipyards have been drawing new orders in recent months, but whether they are sustainable remains uncertain.

The shipbuilding sector requires broad industrial-level reorganization especially in the three big names Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, rather than small firms like STX Offshore & Shipbuilding. “An M&A outline will come out once the government sets the restructuring guideline for the shipbuilding industry - whether the country is better off with one or two instead of three majors,” he said.

By Lee Seung-yoon and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]