Court receivership cannot be ruled out for Daewoo Shipbuilding & Marine Engineering (DSME), one of South Korea’s top shipyards, as bondholders struggle to agree to take a haircut to save the builder.
Among key bondholders who have expressed concern about restructuring plans are the nation’s pension scheme and post office.
Nevertheless, DSME CEO Jung Sung-leep vowed today during a shareholder’s meeting that the yard will push ahead with “bone-crushing” self-rescue measures “to survive.”
“We aim to improve our financial structure by winning new orders and making a continuous profit,” Jung said.
For his part, Jung, formerly with STX, has refused to take any salary this year.
Seoul has been forced to ready another multi-billion rescue package for DSME, which has been hit by a slump in new orders as well as a giant accounting fraud.
“Daewoo is struggling with a sharp drop in new orders, reflecting significant oversupply in the global shipping industry,” ratings agency, Fitch Ratings, noted earlier this week.
“One creditor, the National Pension Fund, has already flagged legal concerns over accepting the bailout plan. It is likely that Daewoo would eventually require further support, even with the bailout, given the weak outlook for the shipbuilding sector,” Fitch said.
Another international ratings agency, Moody’s, also warned that a mooted debt-to-equity swap suggested by lead creditors is “credit negative” for Korea Development Bank and Export-Import Bank of Korea because of the potential higher loss rate on equity than loans.
“If the restructuring is unsuccessful, the two banks will likely have higher losses on their converted equity stake in DSME than they otherwise would on their current outstanding loans to DSME,” Moody’s said in a statement.