Creditors of the cash strapped Korean shipbuilder Daewoo Shipbuilding & Marine Engineering are looking to secure another rescue package for the company of up to KRW 3 trillion (USD 2.6 billion), Yonhap News Agency cited industry sources.
Led by the state-run Korea Development Bank (KDB), the creditors said that the financial support would be provided amid a decrease in new shipbuilding orders.
Although the shipbuilder was expected to score up to KRW 13.7 trillion of new orders during 2016, it managed to secure only a small portion of this goal with a total of KRW 1.77 trillion of newbuilding contracts during the year, while the owner of two drilling rigs, which were constructed by the yard, decided to push the delivery of these KRW 1 trillion-worth vessels to 2017.
In late 2016, DSME’s creditors unveiled their intentions to support the ailing shipbuilder with some KRW 2.8 trillion through debt to equity conversion and bonds sale.
Under the plan, KDB said it would convert KRW 1.8 trillion of debt into equity, after it earlier converted around KRW 400 billion worth of loans into DSME stocks.
In January 2017, the bank increased its ownership in the shipbuilder from 49.74 percent to 79.04 percent.
The second creditor, the Export-Import Bank of Korea, added that it would buy KRW 1 trillion worth of bonds to be sold by the shipbuilding company.
Driven by the decrease in new orders, DSME said that it plans to undertake a KRW 2.5 trillion self-rescue plan during 2017.
Larger than last year’s KRW 1.6 trillion plan, the new measures would include further decrease in its workforce by up to 2,000 workers. By the end of 2017 the company’s workforce is expected to drop to a total of 8,500 workers.
The plan also includes the disposal of DSME’s non-core assets, such as its IT business, as well as its buildings and floating docks with a total worth of around KRW 500 billion.
Additionally, the shipbuilder decided to cut its 2017 goal for new ship orders to USD 5.5 billion after its 2016 orderbook fell short of expectations.
Separately, DSME released financial results for 2016 which show that the shipbuilder reduced its full-year loss to KRW 2.7 trillion (USD 2.4 billion) from KRW 3.3 trillion (USD 2.9 billion) seen in 2015.
The shipbuilder’s operating loss was also reduced and amounted to KRW 1.6 trillion in 2016, against an operating loss of KRW 2.9 trillion recorded a year earlier.
In addition, DSME posted a revenue of KRW 12.7 trillion in 2016, lower from a revenue of KRW 15 trillion in 2015.