Too Big to Fail
Creditors of Daewoo Shipbuilding & Marine Engineering (DSME) will inject US$3.68 billion into the ailing shipyard for its normalization. At the same time, they decided to push forward with its privatization through restructuring that slashes its workforce and organization. At the same time, they will look into the anatomy of the company to find out who is responsible for DSME’s downfall.
The KDB, the largest shareholder and a main creditor bank of DSME announced a corporate normalization plan with this content in its Board of Directors meeting on Oct. 29. According to the plan, the KDB decided to offer liquidity to DSME in the form of new investment and loans along with the Korea EXIM Bank, the largest creditor bank of DSME.
Moreover, they will expand its capital step by step via a capital increase and an equity swap linked to the KDB’s support for liquidity in order to improve its financial health. Additionally, the KDB and the Korea EXIM Bank will burden 90 percent of refund guarantees (RGs) newly issued by DSME with Korea Trade Insurance Corporation at the same rate. The KDB will implement financial support procedures after signing an MOU with DSME by holding a meeting of creditor banks by Nov. 6.
DSME still has many hurdles to overcome for its normalization. The biggest problem is offshore plants. The company should lower risk from its offshore plant business by paring the offshore plants’ current percentage of over 50 percent down to 40-plus percent.