A local court has approved a filing by South Korea’s Sungdong Shipbuilding & Marine Engineering Co. to be placed under its receivership after the debt-stricken mid-sized shipbuilder applied for protection last month.

The Changwon District Court on Friday decided to proceed with a debt-restructuring program for Sungdong Shipbuilding & Marine Engineering less than a month after the company filed for a court-led reorganization program in March. The court appointed a consultant specializing in shipbuilding as a third-party administrator who will jointly oversee rehabilitation on behalf of the company after the shipbuilder’s chief executive has resigned.

Sungdong Shipbuilding & Marine Engineering will be placed under a fast-track reorganization program and will be guaranteed “fair, swift, and efficient procedure given its influence on the regional society,” the court said.

Deloitte Anjin LLC, which has been appointed as auditing company by the court, will carry out due diligence on Sungdong Shipbuilding & Marine Engineering before a final decision on whether or not to continue the court receivership or liquidate the company.

Sungdong Shipbuilding & Marine Engineering, a mid-size shipbuilder based in Tongyeong, South Gyeongsang Province, debuted the market in 2004 and surged to one of world’s top 10 dockyards based on compensated gross tonnage with exports reaching $1 billion in 2009. The shipbuilder, however, suffered from a liquidity crunch in the wake of the global financial crisis in 2008 that led to an overall industry slump. It also grappled with huge investment losses from derivative products, which eventually led to vessel order cancellations and a plunge in new orders.

Sungdong Shipbuilding & Marine Engineering went under creditor management in April 2010. Creditors, however, announced last month to end their workout program after concluding that the liquidation value of the troubled shipyard more than triples the going-concern value. Given its liquidity shortage, the company is most likely to default on its loan obligations within the first half.

By Woo Je-yoon and Lee Eun-joo

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