Daewoo Shipbuilding chief confident of turnaround in Q1
Troubled Daewoo Shipbuilding & Marine Engineering Co. is surely to have logged a profit in the first quarter of the year, and will also report good business results during the remainder of the year, its chief said Thursday, urging bondholders to approve a debt rescheduling scheme for the world’s largest shipyard by order backlog.
Jung Sung-leep, president of Daewoo Shipbuilding, also said the shipbuilder’s liquidity crisis would not happen again if the latest debt rescheduling is implemented as proposed.
“We have secured deals valued at $1.5 billion so far this year, already exceeding the estimate of $2 billion set by an external auditor,” Jung told Yonhap News Agency.
Daewoo Shipbuilding suffered a net loss of 2.79 trillion won last year and an operating loss of 1.53 trillion won.
Late last month, creditors announced a fresh rescue package worth 6.7 trillion won for Daewoo Shipbuilding but only if all stakeholders agree to a debt-for-equity swap plan.
The huge assistance measures represent the second round of bailouts for the shipbuilder that has been suffering from severe liquidity problems over heavy losses in its offshore projects.
Under the rescue package, Daewoo Shipbuilding will receive new loans worth 2.9 trillion won if lenders and bondholders agree to swap 2.9 trillion won of debt for new shares in the shipbuilder.
Bondholders are also required to give a three-year grace period to the repayment of the remaining debt.
But the National Pension Services (NPS), a major bondholder, is demanding more accurate due diligence on Daewoo Shipbuilding, which is largely rejected by the main creditors.
Daewoo Shipbuilding should pay off 440 billion won in corporate debts that mature next week, some 200 billion won of which are held by the NPS.
“The NPS doesn’t need to worry about whether Daewoo Shipbuilding is able to repay debts in three years or not,” said Jung, adding that the shipyard is sure to swing back to the black and market conditions will improve down the road.
Creditors have made it clear that Daewoo Shipbuilding would be put under a new form of court receivership, called a prepackaged plan, unless bondholders of the shipbuilder agree on a debt-for-equity swap plan.
The NPS held a meeting earlier this week over whether to accept the debt-for-equity swap plan, but it made no decision, citing “doubts” over Daewoo Shipbuilding’s financial situation.
Policymakers here are increasingly nervous about the possibility of Daewoo Shipbuilding facing the prepackaged plan, which will undermine 50,000 jobs and trigger massive cancellation of ships under construction.
Next week, bondholders of Daewoo Shipbuilding will gather on April 17-18. If they don’t accept the debt rescheduling, the shipbuilder will be placed under the prepackaged plan.
“Our clients would be tempted to cancel deals with us, if we are placed under a prepackaged plan,” said Jung, adding that huge losses on banks and the shipbuilder would be inevitable.
Meanwhile, Daewoo Shipbuilding’s subcontracted firms called for bondholders to accept the latest debt rescheduling plan, saying that they would be forced to carry out massive layoffs and suffer huge losses if the shipyard is put under the prepackaged rescue scheme.
“Some 1,300 companies which supply parts to Daewoo Shipbuilding will face bankruptcy should the latest bailout plan for Daewoo Shipbuulding is not implemented,” they said.
They urged Daewoo Shipbuilding’s bondholders to approve the debt rescheduling plan.