DSME and its bondholders and main creditor Korea Development Bank (KDB) have agreed on Tuesday to a KRW2.9trn ($2.5bn) bailout scheme, which requires a debt-for-equity swap on half of DSME’s receivables and postponing paying the remainder for three years, the local media reported.
The bonds, worth around KRW500bn to be redeemed in June and November this year, are held by major corporations including the National Pension Service (NPS), the Korea Teachers’ Pension, Korea Post and the National Credit Union Federation of Korea.
KDB, together with the Export-Import Bank of Korea, had said earlier that they will make their loans available to DSME once the majority of the corporate bondholders agree to the government-drawn debt rescheduling plan.
KDB and Korea Eximbank are expected to make the fresh loan to DSME next month at the earliest, it was reported. And with bondholders agreeing to roll over payments of their receivables for three years, DSME has averted a liquidity crisis for the time being.
The shipbuilder, however, continues to face severe challenges ahead, including implementing corporate downsizing, restructuring its business portfolio and winning new orders to generate revenue.
KDB has set DSME a target to reduce its payroll to KRW640bn this year, down 25% from 2016. The shipbuilder is also trying to cut down its workforce to 9,000 in the first half of 2018 from more than 13,000 in 2015.
KDB said DSME is anticipated to restructure into a smaller but still strong shipbuilder, specialising in the construction of LNG carriers and other special purpose containerships.
DSME is one of Korea’s big three shipbuilders, including Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI). The protracted downturn of the global shipbuilding market and recession of the offshore industry has hit the Korean yards hard, forcing the big three yards to undergo painful restructurings bearing the risk of bankruptcy.
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