Samsung Heavy Industries submitted a self-rescue plan to its main creditor bank on late Tuesday, joining other Korean top shipyards undergoing industrywide restructuring to reduce debt and weather the global slump.

It has been 17 years since an affiliate of the Samsung Group handed in reform plans to creditors. Samsung Motors had applied for a court-administered debt restructuring program in June 1999. 


“We submitted a self-rescue plan consisting of measures to secure liquidity and improve financial health to the main creditor Korea Development Bank,” an official at the company said.

Under the proposal, the shipbuilder plans to cut some 1,500 jobs, sell 200 billion won worth ($169 million) of real estate including Samsung Hotel in Geoje, South Gyeongsang Province, and dispose all its stakes in Doosan Engine, according to industry sources.

Financial assistance from Samsung Group and its affiliates was excluded from the plan despite creditors’ expectations for a capital increase led by them.

Samsung Electronics is the largest shareholder in the shipbuilder with a 17.62 percent and other affiliates including Samsung Life Insurance and C&T hold 24.08 percent stakes in the firm.

The move comes after Korea’s top financial regulator Financial Services Commission vowed to make a stronger push in restructuring debt-ridden shipping and shipbuilding companies in April.

With the financial authority and creditor lenders closely monitoring the firms, Korea’s top three shipbuilders -- Daewoo Shipbuilding, Hyundai Heavy Industries and Samsung Heavy Industries – are mapping out their own plans to stay afloat after years of overcapacity depressed the industry.

Last week, Hyundai Heavy Industries, the world’s largest shipbuilder by revenue, said it would conduct another round of restructuring, including significant job cuts and $1 billion worth of asset sales. Daewoo Shipbuilding is currently conducting a stress test and is poised to set up restructuring plans.

“Samsung Heavy Industry needs a radical restructuring plan due to a strong possibility that the company cannot receive new orders as much as it did before,” an official at the state-run Korea Development Bank said.

Faced with one of its most turbulent years, Samsung Heavy Industries has been voluntarily implementing rehabilitation measures since September last year such as selling noncore assets, including property and company resort facilities valued at 100 billion won in total as well as laying off 500 workers.

Despite such efforts, the company has been in the doldrums as orders for new vessels have shrunk. The firm failed to secure any orders so far since last October.

According to data compiled by Hana Institute of Finance, the value of the combined order backlog by Samsung Heavy Industries stood at $30 billion as of end-March, compared with $37.5 billion at the end of 2013.

Its operating profit shrank 76.8 percent to 6.1 billion won during the first quarter of 2016.

By Park Han-na (hnpark@heraldcorp.com)