Okpo Shipyard of Daewoo Shipbuilding & Marine Engineering. (image: Yonhap)
SEOUL, Nov. 25 (Korea Bizwire) – Shareholders of Daewoo Shipbuilding & Marine Engineering Co. on Friday approved a proposed capital reduction scheme, paving the way for the troubled shipbuilder to receive financial aid from its creditors.
The shipbuilder said its shareholders gave the nod to the 10-to-1 capital reduction for shareholders.
Earlier, its creditors, led by state-run Korea Development Bank, said they will provide a total of 2.8 trillion won (US$2.38 billion) in financial aid to the shipyard, and the company’s capital will be written down to help the company avert a delisting from the local stock market.
The creditors plan to complete the financial aid by the end of the year.
Under the plan, the KDB will swap its loans worth 1.8 trillion won into Daewoo Shipbuilding stock. The KDB has already conducted a debt-for-equity swap worth 400 billion won for the shipbuilder.
The other policy lender, the Export-Import Bank of Korea, will buy debt worth 1 trillion won to be sold by Daewoo Shipbuilding, which can be counted as capital, according to the plan.
Daewoo Shipbuilding’s capital base has been eroded due to mounting losses, facing the risk of being delisted from the local stock market.
In the first half of the year, Daewoo Shipbuilding suffered a net loss of 1.19 trillion won with its debt ratio exceeding 7,000 percent.
South Korean shipbuilders have been under severe financial strain since the 2008 global economic crisis which sent new orders tumbling amid a glut of vessels and tougher competition from Chinese rivals.
The country’s top three shipyards — Hyundai Heavy Industries, Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. — suffered a combined operating loss of 8.5 trillion won last year. The loss was due largely to increased costs stemming from a delay in the construction of offshore facilities and an industry-wide slump, with Daewoo Shipbuilding alone posting a 5.5 trillion won loss.
The shipbuilders have drawn up sweeping self-rescue programs worth 11 trillion won in desperate bids to overcome the protracted slump and mounting losses.
(Yonhap)
