The Korea Herald

피터빈트

Daewoo Shipbuilding labor union pressed to accept self-rescue plan

By 임정요

Published : Nov. 9, 2016 - 09:40

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Creditors of embattled Daewoo Shipbuilding & Marine Engineering Co. have demanded that the shipbuilder's labor union accept the company's large-scale restructuring scheme in return for helping the shipyard stay afloat, industry sources said Wednesday.

The creditors, led by the state-run Korea Development Bank, is set to announce a debt-for-equity swap worth 3.2 trillion won ($2.83 billion) for Daewoo Shipbuilding this week, in order to help it avert delisting from the local stock market.


According to the sources, the KDB-led creditors have said that the shipyard's labor union should not launch any strikes and must accept a wage freeze and a workforce reduction plan.

If the labor union does not accept their demands, the lenders said they would not provide any financial help to the stuttering shipyard, the sources said.

Last year, the country's two policy lenders -- the KDB and the Export-Import Bank of Korea (EXIM Bank) -- said they would provide a combined 4.2 trillion won worth of financial aid to Daewoo Shipbuilding, which breaks down to 2.6 trillion won from KDB and 1.6 trillion won from the other lender.

Daewoo Shipbuilding's capital base has been eroded due to mounting losses, facing the risk of being delisted from the local stock market.

In the first half of the year, Daewoo Shipbuilding suffered a net loss of 1.19 trillion won with its debt ratio exceeding 7,000 percent.

After the debt-for-equity swap, Daewoo Shipbuilding will seek to reduce its capital base, with the details to be announced later this month, according to the sources.

Daewoo Shipbuilding will hold a board meeting this week to discuss a capital reduction proposal, they said.

South Korean shipbuilders have been under severe financial strain since the 2008 global economic crisis which sent new orders tumbling amid a glut of vessels and tougher competition from Chinese rivals.

The country's top three shipyards -- Hyundai Heavy Industries, Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. -- suffered a combined operating loss of 8.5 trillion won last year. The loss was due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump, with Daewoo Shipbuilding alone posting a 5.5 trillion won loss.

The shipbuilders have drawn up sweeping self-rescue programs worth 10.35 trillion won in desperate bids to overcome the protracted slump and mounting losses. (Yonhap)