Major bondholders of embattled Daewoo Shipbuilding & Marine Engineering Co. on Monday agreed to the debt rescheduling measures proposed by the state-run Korea Development Bank (KDB)-led creditors, paving the way for the troubled shipyard's other bondholders to support the plan.
After a weeks-long tussle over the debt rescheduling proposal, the National Pension Service (NPS) said earlier in the day that it has accepted the plan to keep the troubled shipbuilder afloat.
The NPS, which owns some 30 percent of the shipbuilder's corporate bonds, took into account that Daewoo Shipbuilding, KDB and the Export-Import Bank of Korea (Eximbank) all agreed to measures that would better ensure the repayment of corporate bonds that would be rescheduled.
Both the KDB and Eximbank sent letters over the weekend pledging the repayment of corporate bonds once conditions improved.
The pension fund had been in drawn-out talks with main creditor banks to discuss ways to keep the shipyard, which has been suffering from a serious liquidity crunch due to a slowdown in global demand, in operation.
In addition to holding a large part of Daewoo's bonds, the NPS owns 45.5 percent of 200 billion won (US$175 million) worth of bonds sold by Daewoo Shipbuilding that comes due Friday.
Following the NPS's acceptance, other major bondholders such as the Korea Post, which have been asked to share in the burden of helping the shipyard, approved the debt rescheduling move.
Investors who hold a total of 940 billion won worth of Daewoo Shipbuilding bonds approved the debt rescheduling plan earlier in the day. Bondholders with some 410 billion won worth of Daewoo Shipbuilding bonds should decide on the debt rescheduling by Tuesday, and Daewoo Shipbuilding expect them to follow suit.
Even after the debt rescheduling plan is approved by bondholders, Daewoo Shipbuilding is estimated to have a shortfall of some 1.5 trillion won this month and next month. Given this, the KDB-led creditors are expected to inject the much-needed cash into the shipyard from May with a proposed debt for-equity swap to be completed in June, industry sources said.
Under the rescue plan, half of the shipyard's corporate bonds and commercial papers will be converted into equity with the rest being rolled over to give Daewoo some leeway. KDB and Eximbank will in exchange inject 2.9 trillion won into the company to allow it to stay in business.
Late last month, the KDB-led creditors announced a fresh rescue package worth 6.7 trillion won for Daewoo Shipbuilding, but only if all stakeholders agree to a debt-for-equity swap plan.
The huge assistance measures represent the second round of bailouts for the shipbuilder that has been suffering from severe liquidity problems over heavy losses in its offshore projects.
Daewoo Shipbuilding creditors have repeated that it is inevitable for Daewoo Shipbuilding to be put under a new form of court receivership, called a prepackaged plan, unless bondholders of the shipbuilder agree on a debt-for-equity swap plan.
Policymakers here are increasingly nervous about the possibility of Daewoo Shipbuilding facing the prepackaged plan, which will eliminate 50,000 jobs and trigger massive cancellation of ships under construction.
Daewoo Shipbuilding is seeking to implement self-rescue measures, worth 5.3 trillion won, through 2018. It has already sold off noncore assets and cut its workforce, through which it has raised or saved 1.8 trillion won.
So far this year, the shipyard has secured $770 million worth of orders and targets to clinch orders worth as much as $5.5 billion.
Daewoo Shipbuilding expects a total of 10 trillion won in cash to come from the delivery of 48 ships in total by the end of the year. (Yonhap News)