SEOUL, March 15 (Korea Bizwire) – Creditors of Daewoo Shipbuilding & Marine Engineering Co. are looking at an option to map out another rescue package worth up to 3 trillion won (US$2.6 billion) for the cash-strapped shipbuilder, as the company is feared to face a deepening liquidity shortage amid a plunge in new orders, industry sources said Wednesday.
In late 2015, the creditors, led by the state-run Korea Development Bank, 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 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. Usually, a shipbuilder receives up to 20 percent of contracts as down payments.
Daewoo Shipbuilding has ratcheted up moves to sell its non-core assets to tide over its worsening financial situation. So far, it has raised some 1.6 trillion won by selling assets and laying off employees.
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 next year.
Creditors believe that the shipbuilder will be able to pay off debt that matures next month as the shipbuilder has some 300 billion won in cash and the creditors have some 400 billion won for assistance after spending 3.8 trillion won for debt-for-equity swaps and others for the shipyard.
But the shipyard is expected to face a cash shortage of up to 3 trillion won through 2021, the sources said.
In this regard, the creditors have been juggling an option to draw up additional assistance for the shipyard in exchange for more bold self-rescue efforts and huge debt rescheduling among creditors and bondholders in the face of strong criticism that any additional assistance would end up in failure.
The creditors are expected to extend fresh financial assistance to Daewoo Shipbuilding after massive debt rescheduling, the sources said.
The country’s financial authorities are set to announce its stance for the shipyard’s fate next week, and many believe that they would opt to salvage the shipyard from sinking, as its demise could have far-reaching consequences on the economy.
The shipyard has some 22 trillion won in debt, and its employees amount to some 10,000. But its subcontracted firms have some 30,000 employees.