Delay of Selling-out

Creditors of Daewoo Shipbuilding & Marine Engineering has decided to postpone the sale of its subsidiaries until 2018.
Creditors of Daewoo Shipbuilding & Marine Engineering has decided to postpone the sale of its subsidiaries until 2018.

 

Creditors of Daewoo Shipbuilding & Marine Engineering (DSME), which is coming up with final self-rescue measures, has decided to postpone the sale of its subsidiaries until 2018.

An official from creditors said on June 5, “With existing backlog, DSME is likely to post annual sales of 8 trillion won (US$6.75 billion) in the next three years. So, we have decided to delay the sale of its subsidiaries until 2018 when they will be able to receive a fair price, and secure 300 billion won (US$252.95 million) by spinning off its defense unit into a subsidiary and selling the stake.

DSME announced its plan to sell its six subsidiaries – the Mangalia Shipyard in Romania, DSME Construction, DeWind, DSME Oman, DK Maritime and FLC – in October last year. However, the company has sold only its golf course unit FLC up to now. Creditors have also decided to sell eight more subsidiaries, including DSME Shandong, Shinhan Heavy Industries and Samwoo Heavy Industries. The selling values of the eight companies are expected to total 600 billion to 700 billion won (US$505.9 million to 590.22 million), half the asset prices, even when they maintain sales until 2018.

Creditors will attract investment first after separating DSME’s special vessel unit and put it in its wholly owned subsidiary because they believe the measure has higher chances than the sale of subsidiaries. They plan to raise funds of up to 300 billion won (US$252.95 million) by selling 30 percent to 40 percent of its stake, while making DSME hold more than 50 percent.

However, some say that major defense firms, such as Hanwha Techwin and LIG Nex1, will not be so interested in DSME’s defense unit due to the fact that the unit takes only a small part in the company and it didn’t put up for sale of the management rights.

The Korea Development Bank (KDB) announced its plan to increase capital by issuing 1 trillion won (US$843.17 million) worth of new stock in October last year. About 600 billion won (US$505.9 million) out of 1 trillion won (US$843.17 million), which haven’t been issued yet, will be carried out in the method of debt-equity swap in the second half of the year. Financial investment industry sources have considered the capital increase or debt-equity swap by creditors as a barometer of DSME’s revival. Thus, KDB’s movement to push ahead with the debt-equity swap is a clear sign of DSME’s survival.

The KDB will consider new financial support when it sees the business value of DSME’s new ship orders which are currently in talks with Iran.

 

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