Daewoo unlocks bailout

SEOUL: South Korea’s Daewoo Shipbuilding & Marine Engineering Co Ltd has won near unanimous agreement from bondholders to swap their debt for equity, meeting a condition that unlocks a $2.6 billion bank bailout for the world’s biggest shipbuilder.

Daewoo won approval from over 96% of bondholders at two meetings yesterday and three on Monday, with attendance exceeding 78%. The meetings came shortly after the shipbuilder won the approval of its biggest bondholder, the National Pension Service.

“We will normalise the company as soon as possible through bone-grinding effort, so you (bondholders) can come to think you made a good choice for yourselves, the company and the economy,” chief executive Jung Sung-leep said in a statement.

The shipbuilder has been pushed to the brink by the impact of historically low oil prices, which caused delays in payments for complex offshore facilities. At risk is an estimated 50,000 jobs and an economic hit of tens of billions of dollars.

“But with bondholders accepting a debtto-equity swap, Korea Development Bank (KDB) and Export-Import Bank of Korea (KEXIM) will supply up to 2.9 trillion won from late April or early May after court approval,’’ a KDB official said.

“The bailout plus a 4.2 trillion won bailout starting in late 2015 amounts to South Korea’s biggest state-backed rescue of a single company in over a decade,’’ state bank officials said.

The new cash will help Daewoo meet its need for about 471 billion won in operating funds by the end of April, and allow commercial banks to resume issuing ship owners refund guarantees on orders Daewoo wins, without which contracts are voided.

Daewoo can also continue building the 108 ships ordered as of February for ontime delivery.

“Delivery dates of nearly all existing orders — and payments for delivery — are either this year or next,’’ a Daewoo spokesman told Reuters.

Daewoo’s existing orders amount to the most in the world at 6.2 million compensated gross tonnage (CGT), Clarksons Research data show.