South Korea shipyard offered $6B lifeline
SOUTH Korea offered troubled Daewoo Shipbuilding & Marine Co a new $6 billion bailout yesterday, as the giant firm’s financial crisis worsens.
Daewoo is the world’s largest shipyard in terms of its order book and was previously given a 4.2 trillion won ($3.8 billion) aid package in 2015.
It is majority-owned by stateowned banks. Previously, it was a subsidiary of the nowdefunct Daewoo Group, once the country’s second-largest conglomerate but which collapsed in the 1990s.
The shipbuilding unit survived, only for the sector to suffer turmoil of its own in the face of a global glut of vessels and ferocious price competition from China.
It suffered a 2.7 trillion won net loss last year, with its debts 27 times greater than its capital.
The 6.7 trillion won ($6 billion) bailout envisages 2.9 trillion won in fresh loans from the Korea Development Bank, its largest shareholder and main creditor, and the ExportImport Bank of Korea, also a shareholder.
The money is conditional on other lenders and bondholders agreeing another 3.8 trillion won in debt-for-equity swaps and rollovers.
The new rescue plan sparked criticism that Seoul was backtracking on earlier promises to stop injecting fresh funds into Daewoo.
“We’re very sorry that we’ve failed to assess more conservatively the industry’s longterm slump and Daewoo’s latent downside risks,” said KDB CEO Lee Dong-geol.
Daewoo was in “critical” financial condition and would face insolvency in April, when it has to repay large corporate bonds, unless “strong and comprehensive measures” were taken, he told journalists.
Economist Chun Seong-in at Hongik University lambasted the Finance Ministry for being “inconsistent, belated and unfair” in its dealings with the company, which has more than 10,000 employees.
The ministry “missed a chance for a radical corporate restructuring” in 2015, forcing the government to inject additional funds, he said.
The global shipbuilding slump is expected to ease from 2018, when according to Yonhap news agency the government hopes to sell a downsized and reborn Daewoo to reduce the country’s “Big Three” shipbuilders – which also include Hyundai Heavy Industries and Samsung Heavy Industries – to two, for better economies of scale.