DAEWOO GETS BIG LIFELINE
World’s largest shipyard in terms of order book to receive 6.7tril won govt bailout
SEOUL of its own in the face of a global glut of vessels and 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 bailout envisages 2.9 trillion won in fresh loans from the Korea Development Bank (KDB), its largest shareholder and main creditor, and the Export-Import 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 long-term slump and Daewoo’s latent downside risks,” said KDB chief executive officer Lee Dong-Geol.
Daewoo was in “critical” financial condition and would face insolvency next month, when it had to repay large corporate bonds, unless “strong and comprehensive measures” were taken, he said.
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.
Daewoo Shipbuilding’s former head Ko Jae-Ho was in January sentenced to 10 years in prison for manipulating the company’s books in 2013 and 2014, and using them to raise bank loans.
Investors sustained serious financial losses as the company’s credit ratings and stocks plunged after the window-dressing came to light. AFP