South Korea’s Daewoo Shipbuilding & Marine Engineering (DSME) is seeking to sell its subsidiary Samwoo Heavy Industry to speed up its own efforts to overcome a liquidity crunch after it barely escaped a court-led prepackaged program with creditors agreeing to convert their loans to equity.
According to investment banking sources on Wednesday, KPMG Samjeong, DSME’s deal adviser, sent teaser letters to domestic and overseas potential investors at the end of April. The adviser is planning to receive letters of intent from potential bidders by the end of May before a formal bidding in mid-June, with a goal to complete the entire transactions by July.
Samwoo Heavy Industry located in Gwangyang, Jeonnam Province, and founded in 2007 is a manufacturer of ship and offshore plant equipment. DSME wholly owns Samwoo, which generates 95 percent of sales from trade with DSME companies. Samwoo posted an operating profit of 9.1 billion won ($8.5 million) on sales of 163.8 billion won last year.
Samwoo already began to prepare for the sale in late 2015 by reducing its asset, as it sold part of production facilities to a rival firm and a stake in its metal-making subsidiary to DSME.
DSME has put multiple subsidiaries on sale after its announcement of a self-rescue restructuring plan last June, but most of them failed to find new owners. DSEC, its ship-design subsidiary, was successfully sold to Yunjin-Keystone PE, but negotiations to sell other subsidiaries like DSME Construction and Wellive Corporation fell apart.
DSME avoided the court-led prepackaged program, which would expedite debt write-off and reorganization, following a last-minute agreement among creditors in mid-April, but its new shipbuilding orders earned this year came to a mere $770 million, far short of its 2017 goal of $5.5 billion.
The shipbuilder sold its Dangsan, Seoul office to a debt-clearing house for 35.2 billion won early last year and is now trying to sell real estate in Magok, Seoul. Talks are underway to sell its food service company Wellive to Bayside PE.
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