Creditors of Daewoo Shipbuilding & Marine Engineering Co. are set to announce a set of new rescue schemes next week for the cash-strapped shipbuilder, with many expecting the shipbuilder to be put under a debt workout in the worst case scenario, industry sources said Saturday.
According to the sources, the creditors, led by the state-run Korea Development Bank, will map out up to 3 trillion won (US$2.6 billion) worth of assistance measures for the shipbuilder to help the company overcome a deepening liquidity shortage amid a plunge in new orders.
The expected rescue schemes, the second of their kind, came amid criticism that another round of large-scale financial assistance for Daewoo would end in failure. Some watchers even said the "too-big-to-fail" mantra can be heard again in Asia's fourth-largest economy.
In late 2015, the creditors announced a rescue package worth 4.2 trillion won, a huge chunk of which has already been spent to salvage the shipyard through debt-for-equity swaps and other arrangements.
Their financial assistance was based on a rosy outlook that the shipbuilder would clinch up to $12 billion worth of orders last year, and the delivery of newly built ships would go smoothly.
But Daewoo Shipbuilding bagged a meager $1.55 billion worth of new orders, and the delivery of two drilling rigs worth 1 trillion won, originally scheduled for early last year, has been delayed to this year due to a customer's worsening financial status.
Consequently, the shipbuilder failed to secure some 3 trillion won in cash last year.
Daewoo Shipbuilding's financial status is worsening at a faster-than-expected pace. The shipbuilder suffered an operating loss of 1.61 trillion won last year following an operating loss of 2.94 trillion won in 2015.
Its net loss narrowed to 2.71 trillion won last year from a loss of 3.3 trillion won a year earlier with sales also dipping 15.1 percent on-year to reach 12.74 trillion won, it said.
The pending and sticky problem facing Daewoo Shipbuilding is to pay off 440 billion won worth of debt due next month. It has to refinance or pay off a total of 940 billion won worth of debt this year and 550 billion won next year.
But the shipyard is expected to face a cash shortage of up to 3 trillion won through 2021, the sources estimated.
In this regard, the creditors have been skewed toward drawing up additional assistance for the shipyard in exchange for more bold self-rescue efforts and huge debt rescheduling among creditors and bondholders.
The creditors are expected to extend fresh financial assistance to Daewoo Shipbuilding after massive debt rescheduling, the sources said.
The shipyard has some 22 trillion won in debt, and its employees amount to some 10,000, with its subcontracted firms having some 30,000 employees. (Yonhap)
Park Byung-uk email@example.com
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