Liquidation of STX Dalian
With the STX Group’s shipyard in Dalian, China around the corner, it has been found that the Korean creditors are on the verge of losing all of the 160 billion won (US$151 million), which was lent to STX Dalian in the form of a syndicate loan.
This is because they lacked the understanding of local law, according to which the establishment of security has to obtain the permission of the authorities. The creditors claimed that the collateralized amount could be recovered even after they disposed of STX Dalian, but it turned out to be false in the end. Under the circumstances, the Korea Development Bank (KDB), which is the lead bank of the syndicate loan, is likely to be subject to some criticism.
According to local financial sources, the security rights of the Korean creditor banks including the KDB, Woori Bank, Kookmin Bank, and Shinhan Bank are invalid, because they did not obtain the permission of the Chinese foreign exchange authorities while establishing the security. “Drawing up the business normalization plan back in July this year, the creditors reflected the 700 billion won guaranteed for Chinese banks in preparation of liquidation, while predicting that the 160 billion won general loan can be recovered,” said one of the banks, adding, “However, something unexpected has happened and it can lead to controversies with time.”
Besides, the creditors in China are claiming that the payment guarantee recently provided by the local subsidiaries of STX, such as STX Shipping, be handled by their Korean counterparts. “It seems that China is planning on taking STX Dalian for nothing, capitalizing on the lax handling on the part of the Korean financial authorities and creditor banks that underestimated its negotiation strategies,” an industry insider explained, continuing, “They lost the timing of production normalization and are likely to be bossed around by China down the road.”
In the meantime, the association of the 50 or so Korean partner firms of STX Dalian held a rally in Seoul on December 12, claiming that the liquidation of STX Dalian be stopped to prevent the leakage of national wealth and technologies worth three trillion won (US$2.8 billion).
“A total of US$2.9 billion has been invested in STX Dalian, including the initial investment of US$1.5 billion made in 2007 and the loan of US$1.4 billion, but the company is on the brink of ending up in the hands of China due to the negligence of the financial authorities and creditor banks,” said President Choi Hee-am of the Chinese branch of KISWEL, who is the head of the association. He went on to say, “The local creditors are saying that there is no room for them to step in, because they lent just US$300 million to US$400 million out of the US$1.4 billion, but the money lent by Chinese banks is only US$420 million if the US$700 million guaranteed by STX’s subsidiaries is excluded,” adding, “It is a dereliction of duty if the creditors do not come up with a plan to prevent the drain of national wealth.”
The association filed a petition with the Blue House for the normalization of the management of STX Dalian, and is planning to take similar measures with the Ministry of Strategy and Finance, and the Ministry of Trade, Industry and Energy.