SEOUL, March 13 (Korea Bizwire) – Cash-strapped Daewoo Shipbuilding & Marine Engineering Co., a major shipyard in South Korea, is accelerating its move to sell its non-core assets to beef up its financial status amid concerns over a sharp fall in new orders, industry sources said Monday.
According to the sources, Daewoo Shipbuilding has recently signed a memorandum of understanding to sell its building in downtown Seoul, a deal valued at some 35 billion won (US$30 million).
The shipbuilder also put one of its affiliates up for sale, whose price tag is set at some 18 billion won, with the two cases of asset sales expected to be completed by April, the sources said.
Daewoo Shipbuilding’s efforts to offload its non-core assets came as the shipbuilder is struggling with falling new orders and signs that its financial status is worsening.
Creditors of Daewoo Shipbuilding are reportedly mulling an option to provide additional assistance to the cash-strapped company.
The creditors, led by the state-run Korea Development Bank, announced a rescue package worth 4.2 trillion won in October 2015 for Daewoo Shipbuilding, on expectations 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 things turned out to be worse than expected.
Last year, 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 been speeding up efforts 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 debts due next month. It has to refinance or pay off a total of 940 billion won worth of debts this year and 550 billion won next year.
The country’s financial authorities are set to announce their stance on the shipyard’s fate this month, and many believe they will opt to save the shipyard from sinking as its demise could have far-reaching consequences on the economy.