The main creditor bank of Daewoo Shipbuilding & Marine Engineering on Sunday expected a “good result” in talks with a major bondholder that will help the shipyard stay afloat.
The state-run Korea Development Bank and the National Pension Service have engaged in talks since late March to find common ground on debt rescheduling measures for the troubled shipbuilder.
“We have reached a consensus on many disputed points and expect a good outcome (from the talks) at the earliest date,” KDB Chairman and Chief Executive Lee Dong-geol said in a press conference at the bank‘s headquarters in Yeouido.
Institutional investors, including the state pension fund NPS, collectively own 90 percent of corporate bonds worth 1.35 trillion won ($1.19 billion) issued by Daewoo Shipbuilding. Individuals hold the remaining 10 percent.
NPS invested 390 billion won and controls 29 percent of the shipbuilder’s corporate bonds.
KDB represents creditor banks which have extended loans to the cash-strapped shipbuilder over the past decade. Shipbuilders have struggled with oversupply and declining orders since the 2008 financial crisis.
Bondholders led by NPS have demanded main creditor KDB provide a full payment guarantee for the corporate debt they bought from DSME. But the state lender has balked at the request, saying it is against guidelines of “unfair loss sharing” arrangement among investors.
“We have asked the major bondholder NPS to make a concession to evenly share possible losses from investments in the shipbuilder‘s corporate bonds with other holders. And we hope to receive a positive response from it,” a KDB spokesman said by telephone.
In its final proposal sent to the bondholders, KDB said it will deposit the principal of maturing corporate bonds in a designated account a month ahead of an extended maturity date. It will also have the shipbuilder put 100 billion won in another account for DSME bondholders in case of the company’s liquidation.
In five rounds of talks set for Monday and Tuesday, bondholders have to decide on whether to accept the debt-rescheduling plan presented by the shipbuilder‘s creditors or not.
Under the plan, 50 percent of the 1.35 trillion won corporate debt will be converted into equity and the maturity date of the remaining 50 percent debt will be extended by three years.
If the bondholders reject the debt-for-equity swap offer, the shipbuilder will be put under a new form of court receivership called a “prepackaged plan.” Under the prepackaged plan, the court-led debt rescheduling will be carried out over a short period of time, but it could deliver a blow to Asia’s fourth-biggest economy.
Policymakers here are increasingly nervous about the possibility of DSME facing the prepackaged plan, which will undermine 50,000 jobs and trigger massive cancellation of ships under construction.
Late last month, the KDB and another state-run creditor Export-Import Bank of Korea announced a fresh rescue package worth a combined 6.7 trillion won for DSME, but only if all stakeholders agreed to the 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.
Under the rescue package, DSME will receive new loans worth 2.9 trillion won if lenders and bondholders agree to swap 2.9 trillion won of debt for new shares in the shipbuilder. (Yonhap)