SEOUL, April 26 (Korea Bizwire) – South Korea will make a stronger push in restructuring financially-troubled shipping and shipbuilding companies, but the restructuring drive itself should be spearheaded by firms and their creditors, the country’s top financial regulator said Tuesday.
“Last year, the overall value of ship orders clenched by local shipbuilders stood at US$10 billion. But this year, new orders have nearly dried up, overwhelming shipbuilders’ ongoing self-rescue efforts,” Financial Services Commission (FSC) Chairman Yim Jong-yong told a press briefing, also pointing out what he called worsening business conditions and little signs of recovery for the shipping industry as well.
The FSC outlined intensified restructuring measures for shipping lines and shipbuilders that include additional job cuts, wage reductions and sale of non-core assets.
The move comes as shipping and shipbuilding firms continue to perform poorly due to sharp declines in freight charges and ship orders amid oversupply and low demand. They have inked hefty losses in the years since the 2008 financial crisis.
Under its self-help plans announced last year, Daewoo Shipbuilding & Marine Engineering Co. has sold 360 billion won (US$313.3 million) worth of assets and cut 709 jobs. Its creditor banks will push forward stricter measures to help the company stay afloat, the FSC said in a statement.
Main creditors of Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. plan to closely watch the companies’ self-rescue steps, it added.
Hyundai has sold 1.6 trillion won worth of assets while cutting 1,533 jobs, with Samsung getting rid of 100 billion won worth of assets and 1,500 workers.
The three shipbuilders are the world’s three biggest shipbuilders by order backlog.
In the shipping industry, freight charges have dropped more than 25 percent from the end of last year, further hurting the bottom line of shipping companies, according to the FSC chairman.
“For survival, shipping firms have to succeed in lowering their charter costs without fail through renegotiations and they have to roll over their maturing debts. If they fail to reduce their charter costs, it will be inevitable for them to be placed under a court receivership,” he said.
Hanjin Shipping Co., the country’s biggest container carrier by sales, has recently applied for a creditor-led restructuring that requires approval from the financial authorities. The company has so far raised 3.3 trillion won by selling assets and paid back 2.5 trillion won in debts.
Hyundai Merchant Marine Co., the second-largest container shipper here, has raised 4.3 trillion won through asset sales, and now owes 1.1 trillion won less in debt.
Asked about a possible merger between the two shipping firms, Yim said, “It is too early to discuss the merger between Hanjin Shipping and Hyundai Merchant.”
As for a possible merger between the three shipbuilders, he said the option was “not under consideration for now.”