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Dongbu Steel may avoid a forced exit from the stock market, as its main creditor pushes for a debt-equity swap that would help the company reduce debt and meet capital requirements for a listing maintenance.
“Creditors are in talks for a debt-to-equity swap to help our firm avoid being delisted, but the amount or timing of it is not decided,” the steelmaker said Thursday in a filing in Seoul.
The state-run Korea Development Bank, Dongbu’s largest creditor, is currently lining up support from other creditors for the swap deal, which local reports said could be somewhere between 120 billion won ($98.7 million) and 200 billion won.
Dongbu Steel is under a creditor-led corporate rehabilitation program during which the threshold for creditor approval of a plan is 75 percent of the vote. KDB controls 60 percent of the ballot. No. 2 creditor is Nonghyup with 9.2 percent and another state-run institution, the Export-Import Bank of Korea, is at third with 7 percent.
KDB hopes to hold a vote on the plan later this week at the earliest.
“Providing Dongbu Steel a lifeline and helping it maintain a listing will increase the chances of us recouping our money, potentially through a sale at a later date,” a KDB official said.
The creditors had sought to sell Dongbu, Korea’s fifth-largest steelmaker, but the effort failed as none came forward to buy the debt-saddled firm amid global steel industry woes.
Other steel companies are also fighting for survival in the face of a global supply glut, with no turnaround expected in the near future as demand from China and emerging economies cools.
“Creditors are in talks for a debt-to-equity swap to help our firm avoid being delisted, but the amount or timing of it is not decided,” the steelmaker said Thursday in a filing in Seoul.
The state-run Korea Development Bank, Dongbu’s largest creditor, is currently lining up support from other creditors for the swap deal, which local reports said could be somewhere between 120 billion won ($98.7 million) and 200 billion won.
Dongbu Steel is under a creditor-led corporate rehabilitation program during which the threshold for creditor approval of a plan is 75 percent of the vote. KDB controls 60 percent of the ballot. No. 2 creditor is Nonghyup with 9.2 percent and another state-run institution, the Export-Import Bank of Korea, is at third with 7 percent.
KDB hopes to hold a vote on the plan later this week at the earliest.
“Providing Dongbu Steel a lifeline and helping it maintain a listing will increase the chances of us recouping our money, potentially through a sale at a later date,” a KDB official said.
The creditors had sought to sell Dongbu, Korea’s fifth-largest steelmaker, but the effort failed as none came forward to buy the debt-saddled firm amid global steel industry woes.
Other steel companies are also fighting for survival in the face of a global supply glut, with no turnaround expected in the near future as demand from China and emerging economies cools.
Trading in Dongbu Steel on the main KOSPI stock exchange has been halted since Feb. 15, when the operator requested the firm clarify media reports that its capital health had deteriorated to an extent that made it subject to potential delisting.
On Monday, the steelmaker revealed that its capital stock was, and had been for the past two years, over 50 percent impaired by liabilities. This means unless the firm manages to boost its equity capital -- through a sale, debt-equity swap or by other means -- before the scheduled report of the annual audit at the end of March, it will be delisted.
By Lee Sun-young (milaya@heraldcorp.com)
On Monday, the steelmaker revealed that its capital stock was, and had been for the past two years, over 50 percent impaired by liabilities. This means unless the firm manages to boost its equity capital -- through a sale, debt-equity swap or by other means -- before the scheduled report of the annual audit at the end of March, it will be delisted.
By Lee Sun-young (milaya@heraldcorp.com)
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Articles by Korea Herald
