Daewoo Shipbuilding unlocks $2.6 bln Bailout
Bondholders at final meetings agree to debt-to-equity
swap; shipbuilder needs about $400 mln in operating funds by
South Korea's Daewoo Shipbuilding & Marine Engineering Co Ltd
has won near unanimous agreement from bondholders to swap their
debt for equity, meeting a condition that unlocks a $2.6 billion
bank bailout for the world's biggest shipbuilder.
Daewoo won approval from over 96 percent of bondholders at two
meetings on Tuesday and three on Monday, with attendance
exceeding 78 percent. The meetings came shortly after the
shipbuilder won the approval of its biggest bondholder, the
National Pension Service.
"We will normalise the company as soon as possible through
bone-grinding effort, so you (bondholders) can come to think you
made a good choice for yourselves, the company and the economy,"
Chief Executive Officer Jung Sung-leep said in a statement.
The shipbuilder has been pushed to the brink by the impact of
historically low oil prices, which caused delays in payments for
complex offshore facilities. At risk is an estimated 50,000 jobs
and an economic hit of tens of billions of dollars.
But with bondholders accepting a debt-to-equity swap, Korea
Development Bank (KDB) and Export-Import Bank of Korea (KEXIM)
will supply up to 2.9 trillion won from late April or early May
after court approval, a KDB official said.
The bailout plus a 4.2 trillion won bailout starting in late 2015
amounts to South Korea's biggest state-backed rescue of a single
company in over a decade, state bank officials said.
The new cash will help Daewoo meet its need for about 471 billion
won in operating funds by the end of April, and allow commercial
banks to resume issuing ship owners refund guarantees on orders
Daewoo wins, without which contracts are voided.
Daewoo can also continue building the 108 ships ordered as of
February for on-time delivery.
Delivery dates of nearly all existing orders - and payments for
delivery - are either this year or next, a Daewoo spokesman told
Daewoo's existing orders amount to the most in the world at 6.2
million compensated gross tonnage (CGT), 70 percent or more over
compatriots Samsung Heavy Industries Co Ltd and Hyundai Heavy
Industries Co Ltd, Clarksons Research data showed.
But the shipbuilder aims to become more sustainable by cutting
annual revenue to about 7 trillion won by 2018 from 12.7 trillion
won last year, CEO Jung previously said.
After shrinking, the government intends to sell its stake in
Daewoo and consolidate the biggest three domestic shipbuilders
into two, the Financial Services Commission and KDB have said.
Daewoo will also continue with a planned 5.3 trillion won in
asset sales and cost-cutting, ongoing since late 2015, by selling
a construction subsidiary, a shipyard in Romania and three other
units. So far, Daewoo has met a third of its goal.
Last week, it said about 98 percent of employees and executives
had agreed to a pay cut. The shipbuilder aims to cut labour costs
by about 25 percent this year to 640 billion won, almost half the
figure of two years earlier.
Reporting by Joyce Lee
Apr 18, 2017