S2.5 Billion Injection
Creditors of debt-laden Daewoo Shipbuilding & Marine Engineering Co. said that it will inject 2.8 trillion won (US$2.42 billion) into the company, but conditioned that the shipbuilder's labor union accept the company's large-scale restructuring scheme.
Under the plans, the state-run Korea Development Bank (KDB), the main creditor for the shipbuilder, will swap its loans worth 1.8 trillion won (US$1.55 billion) into Daewoo Shipbuilding stock. The Export-Import Bank of Korea will buy 1 trillion won (US$US$862.81 million) worth of perpetual bonds to be sold by Daewoo Shipbuilding. Once the recapitalization scheme is completed, the company will be get out of the complete impairment of capital and see its equity capital increase by 1.6 trillion won (US$1.38 billion). Accordingly, the debt ratio will be dramatically improved to 900 percent and face less difficulties to win orders with better financial statements.
As the main creditor, the KDB said that it will cancel about 60 million of its Daewoo shares, and reduce the remaining stake by a ratio of ten shares to one to cut the ship builder's debt-to-asset ratio.
However, the creditors stressed that the recapitalization scheme could be implemented only if the shipyard's labor union accept their restructuring scheme. They said, “Without a faithful commitment of the management and labor to share the burden, we will not consider any plans to help normalize the business, including financial structure improvement plan.” Daewoo Shipbuilding’s labor union is now opposed to the current normalization plan to spin off its special ship division and the one to reduce the capital of 31.6 billion won (US$27.26 million) of shares acquired by the employee stock ownership association in December last year.
Daewoo Shipbuilding’s labor union doesn’t have much time because the board meeting of the KDB will be held next week. It should submit the consent form before the meeting in order to carry out the recapitalization scheme as scheduled. If the labor doesn’t do so, the KDB cannot propose the debt-equity swap scheme at the meeting and the bank, which is the largest shareholder, cannot but vote against the capital reduction plan at the Daewoo Shipbuilding’s general shareholders meeting to be held on the 25th.