Midsized shipbuilders under restructuring
The Korean shipbuilding industry’s restructuring is picking up speed, as a growing number of midsize shipbuilders have exited or are attempting to exit from creditors’ control.
According to the Export-Import Bank of Korea (Eximbank), the court receivership of Sungdong Shipbuilding & Marine Engineering ended May 11, following the consent of creditors including the state-run lender. The Eximbank was also the largest stakeholder in Sungdong with 81.25 percent before a sale.
Sungdong began a creditor-led restructuring program in March 2010, and went into court receivership in April 2018. Since then, Changwon District Court had three botched attempts to sell Sungdong before selecting HSG Heavy Industries as the preferred bidder in November last year.
“Since the 2008 global financial crisis, most of Korea’s small and midsize shipbuilders have changed their portfolio or stopped operations,” an Eximbank official said. “Against this backdrop, the successful completion of Sungdong’s receivership is becoming a model case for midsize shipbuilders.”
Along with Sungdong, there are a number of other midsize shipbuilders owned by Eximbank and another state-run lender, the Korea Development Bank (KDB), that have been put on standby for sale.
Of these, the KDB is attempting to sell Hanjin Heavy Industries & Construction, while Eximbank has put Dae Sun Shipbuilding &Engineering up for sale.
Hanjin Heavy said it will put forward an 83.45 percent stake held by domestic and Philippines-based creditors on April 21, and the creditors submitted their agreement to the sale to the KDB, the main and largest creditor stakeholder in Hanjin Heavy with 16.14 percent.
The move came after Hanjin Heavy logged a 77.1 billion won operating profit last year, bouncing back from a 66 billion won operating loss in 2018.
Dae Sun is also under a similar process. On May 6, Eximbank, which is the largest shareholder with an 83.03 percent stake, made a public announcement about receiving letters of intent from companies interested in purchasing Dae Sun.
Eximbank attempted to sell Dae Sun in October 2017, but failed to reach a deal due to price differences. However, industry officials said it will be different this time, because Dae Sun also has been showing signs of a recovery.
The shipbuilder posted a 27.99 billion won operating loss in 2017, but turned to an operating profit of 4.2 billion won in 2018 and expanded it to 11.3 billion won last year. Eximbank has already expressed its strong intention to seal a deal, selecting Samil PricewaterhouseCoopers as the lead manager for the sale. It also stated that it will sell the shipbuilder through a “stalking horse offer, meaning Dae Sun will select an initial bidder (a stalking horse bidder) and then launch a public auction so that other bidders cannot underbid the price offered by the initial bidder.