Daewoo Shipbuilding & Marine Engineering has been hurt by massive losses at its offshore projects.<\/b>
SEOUL\u2014Daewoo Shipbuilding & Marine Engineering Co.\u2019s state-run creditors on Thursday unveiled a 2.9 trillion won ($2.6 billion) rescue package for the South Korean shipbuilder, which has been hurt by massive losses from its offshore projects.
The bailout is the latest example of the global shipbuilding industry\u2019s difficulties, as a glut of vessels and low freight rates put many shipyards in financial trouble in recent years. An economic slowdown in China has made things worse for the world\u2019s three biggest shipyards, which are all in South Korea.
Korea Development Bank and Export-Import Bank of Korea said they would provide funds to improve Daewoo\u2019s cash flow and convert its liabilities into equity to cut debt.
The two state-run banks had already provided a combined 4.2 trillion won in aid to the cash-strapped shipyard in 2015.
\u201cIn return for this rescue package, we\u2019ll implement rigorous restructuring at the shipbuilder, including deep job cuts and sale of nonprofitable businesses,\u201d said KDB, Daewoo\u2019s largest shareholder and main creditor.
The Financial Services Commission, Korea\u2019s main financial regulator, said the bailout would hinge on the condition that Daewoo\u2019s other creditors, including commercial lenders and private bondholders, would also agree to deep cuts and accept a debt-to-equity swap.
FSC Chairman Yim Jong-yong told a parliamentary committee earlier this week that if there is no consensus among the creditors on a restructuring plan, \u201cvarious options, including court receivership and a split-up, are under study.\u201d
Korean shipbuilders\u2019 profits started sliding after the 2008 global economic crisis cut orders, while lower-cost Chinese rivals made inroads into the market.
Shipbuilding is one of South Korea\u2019s flagship industries, accounting for 7% of the nation\u2019s exports and 5% of employment.
The industry crash has already brought down a fellow Korean shipping company. Hanjin Shipping Co. filed for bankruptcy protection last year , leaving $14 billion worth of cargo stranded at sea for months .
The state-run KDB, which owns nearly four fifths of Daewoo through a series of debt-equity swaps and rights offers in past years, said it aims to eventually privatize the shipbuilder while pursuing a quick business recovery.
The bank acquired Daewoo when the government bailed it out with public funds around the time of the Asian financial crisis in the late 1990s.<\/p>\n