Additional Due Diligence
The creditors of STX Offshore & Shipbuilding conduct their second due diligence on the company following the first one in July. It is quite unprecedented that a due diligence process is repeated on a company going through restructuring.
The creditors recently held a meeting and opted to do so in order to better look into the additional investment worth 1.85 trillion won (US$1.76 billion) caused by a lack of liquidity. Deloitte Anjin and Samil PricewaterhouseCoopers will conduct their due diligence separately. The process in July was handled by the former.
The purpose of the processes is to get a better grasp of the gravity of the situation and the size of the liquidity to be injected in the future. The processes are expected to take about 30 to 45 days and the creditors are planning to finish them before the end of this year.
“We will discuss financing issues again based on the result of the in-depth due diligence,” said one of the creditor banks, adding, “Depending on the result, the management could bear more responsibilities, additional fund support could be made or canceled, and new decisions could be made on corporate rehabilitation and court receivership.”
The accounting firms are going to focus on the shipbuilding costs and contingent liabilities of STX Offshore & Shipbuilding at this time. Specifically, they are planning to analyze with accuracy the size of the contingent liabilities that may take place when shipbuilding is canceled, while re-calculating the shipbuilding costs. According to the creditors, STX Offshore & Shipbuilding discounted the costs at first.
“Of the liquidity shortage of 1.85 trillion won, approximately 900 billion won was derived from the poor shipbuilding contracts of the past, and the rest has been caused by an increase in the costs and a decrease in the number of new orders,” the creditor continued.
The creditor banks will hold a meeting this week to decide on whether or not to provide 200 billion won or more before the year’s end, so that the company can repay the 100 billion won bond maturing on December 23. “We may provide no further support unless STX comes up with self-help plans such as layoffs and wage cuts,” it went on, “According to our analysis, STX Offshore & Shipbuilding is in a critical situation given its impact to the national economy, and thus we may make a significant decision depending on the result of the new due diligence processes.”