Adjusting Ownership
The restructuring of shipbuilders such as Daewoo Shipbuilding & Marine Engineering, STX Offshore & Shipbuilding, and Sungdong Shipbuilding & Marine Engineering is picking up speed, as the creditors are planning on strict measures like M&As, with the stagnation of the industry continuing to make it more difficult for them to get back the money they lent.
Korea EximBank, which is the main creditor bank for Sungdong, suggested an additional support of 300 billion won (US$274.3 million) to the other creditors, but Woori Bank and the Korea Trade Insurance Corporation said no to the proposition on May 11. Their reason for the opposition was the dim outlook of the company, despite the pouring of over 2 trillion won (US$1.8 billion) since the initiation of joint control by creditors in 2010. Under the circumstances, Sungdong’s plan for building new ships with additional funds was thwarted, and the likelihood of court receivership increased, along with the possibility of the cancellation of the orders it received last year. This has resulted in the circulation of rumors that the company would merge with STX.
STX has failed to show meaningful progress since the implementation of the voluntary agreement in April 2013. When STX and Sungdong are merged with each other, the empty docks can be shared, and joint material procurement becomes possible for higher business efficiency, cost reductions, and a reduced risk of cutthroat competition, which will be very helpful for their business to get back on track.
In this context, the Korea Development Bank, which is the main creditor bank for STX, is looking to hand over its subsidiary, STX France, to Daewoo. The purpose is to relieve the financial burden on STX Offshore & Shipbuilding by giving Daewoo a new business opportunity in the form of cruise ships.
Still, the creditors have to deal with opposition from the labor unions and the residents in the regions where the shipbuilders are located. At present, 7,000 to 8,000 people are working in each of the companies, and the restructuring can have a significant impact on the regional economy.