S. Korea to create $9.5-B support fund
The world’s three biggest shipyards plan to raise a combined 8.41 trillion won ($7.3 billion) selling assets and cutting jobs as they seek to pare debt as part of their restructuring program following losses last year.
Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co. have submitted their fund-raising plans to their creditors, including state-run Korea Development Bank and KEB Hana Bank, South Korea’s government said in a statement Wednesday. The banks and regulators will meet twice a month to review the progress of the plans, according to the statement.
A slump in crude oil prices, which halved in the past two years, has roiled the nation’s shipbuilding industry as delivery delays and cancellations of projects translated into losses, while shrinking orders for new vessels have heightened concerns their cash may dwindle further. The South Korean government told the shipyards to submit their plans to help them better manage their financials and minimize the impact on the economy.
Turning around
The government, on its part, said it will bolster capital of state lenders by creating an 11 trillion won fund to help cushion losses as banks aid the restructuring, it said in a statement separately. The steps may be coming amid nascent signs of a recovery. Vessel deliveries in terms of deadweight tons increased 39 percent in May from a year earlier, said Park Moo Hyun, a Seoul-based analyst at Hana Daetoo Securities Co.
“Things are starting to turn around for the shipyards as more vessels and offshore projects are delivered to clients,” Park said. “The focus now should be on providing funds to help them win new orders.”
Hyundai Heavy, whose first-quarter net income beat estimates, plans to raise 3.5 trillion won selling shares in other companies such as KCC Corp. and Hyundai Motor Co., as well as its three financial units, the Ulsan-based company said in a separate statement. It will seek to save 900 billion won from job and pay cuts. The shipyard plans to cut its debt-to-equity ratio to 80 percent from the current 134 percent.
Jobs, wages Daewoo Shipbuilding, which counts Korea Development Bank as its biggest shareholder, will seek to raise 3.45 trillion won from sale of its 14 subsidiaries, two floating docks and the spin-off its specialty shipbuilding business, the company said in a separate statement. It will also reduce jobs and salaries to save money, it said.
The latest plan is in addition to the 1.85 trillion won the shipyard said it will seek to raise in October last year. Daewoo Shipbuilding reported a net
SEOUL (Reuters) – South Korea said on Wednesday the government and the Bank of Korea will create a 11 trillion won ($9.50-billion) fund to support two state-run banks most exposed to shipping and shipbuilding firms currently being restructured.
"Our key industries like shipping and shipbuilding are being aggressively caught up by countries like China and management conditions have worsened due to weak global trade," Finance Minister Yoo Il-ho said in a speech announcing the corporate restructuring plans.
South Korea expects a 20 percent drop in major shipbuilders' capacity and 30 percent drop in their workforce by 2018 versus 2015 after the restructuring process.
The two state-run banks to be capitalized are Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM). income in the first quarter versus a loss a year earlier.
Samsung Heavy plans to sell assets through bond sales and reduce jobs to raise 1.46 trillion won, the company said separately. It also plans to sell new
The Bank of Korea will lend a maximum 10 trillion won for the state-bank fund via a conduit bank, the Industrial Bank of Korea (IBK), and that fund will later purchase contingent convertible bonds (CoCos) from the two statebanks.
Contingent convertible bonds are hybrid assets that can be switched by the borrower from bonds into shares if a pre-set trigger is reached.
The rest of the capital for the statebank fund will be provided by loans from Korea Asset Management Corporation (KAMCO), which will also be in charge of setting up the actual fund.
The fund will be in operation by end2017, although this date may change during year-end reviews.
Separately, the government plans to transfer 1 trillion won worth of assets to the Export-Import Bank by September this year and this will be reflected in next shares if more cash is needed, it said.
South Korea has urged the companies to restructure and improve efficiency, while pledging more steps to help them reduce debt and weather the global slump. (Bloomberg) year's government budget.
The central bank will also consider direct capital injection into the ExportImport Bank in future if needed.
South Korean markets were unmoved by the announcement as the funding measures were widely expected. Shippers, shipbuilders' efforts Yoo added that South Korea's top three shipbuilders have also come up with a plan to weather the difficult market conditions, which they see lasting for two to three years ahead.
The world's three largest shipbuilders, Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, have submitted additional plans to sell up to 4.8 trillion won in combined assets and find 3.6 trillion won through cost cuts, the government said in a statement.