Local credit appraisers on Thursday cut their ratings on Daewoo Shipbuilding & Marine Engineering Co. as the world's No. 2 shipbuilder may have to book massive losses on its balance sheets and is set to undergo large-scale debt restructuring.

KIS Rating slashed its rating on Daewoo Shipbuilding to "A-" from "A," and put the shipbuilder on its watch list for another rating cut.

"Increased operating capital has jacked up its financial burden, and uncertainties increased over its second-quarter earnings and its debt restructuring moves," said the rating agency.

Another rating agency, Korea Ratings, also placed Daewoo Shipbuilding on its negative review list citing ongoing uncertainties related to its massive losses and the possibility of it being placed under a debt-workout program.

Shares of Daewoo Shipbuilding continued to tumble on the Seoul bourse, ending at 8,180 won, down 6.51 percent from the previous session's close.

On Wednesday, the shipbuilder plummeted by the daily permissible limit of 30 percent on concerns it may have to book a cumulative loss of some 2 trillion won ($1.76 billion) on its balance sheet.

Daewoo Shipbuilding said in a regulatory filing on Wednesday that nothing has yet been decided although it is "reviewing a variety of options to improve financial soundness."

Daewoo Shipbuilding, one of the country's big-3 shipbuilders, along with Hyundai Heavy Industries Co. and Samsung Heavy Industries Co., has been suffering because of shrinking orders amid the global economic slump for years.

In particular, local shipyards reported massive losses last year largely due to a rise in shipbuilding costs and losses from offshore plant construction.

For one, Hyundai Heavy swung to a net loss of 2.20 trillion won in 2014 from a net profit of 146.3 billion won the previous year.

It also recorded its biggest operating loss ever of 3.25 trillion won last year, a stark downturn from an operating profit of 802 billion won a year ago.

Daewoo Shipbuilding posted a loss of 172 billion won in the first quarter of the year and logged an operating loss of 43.3 billion won.

As of early June, Daewoo Shipbuilding had secured $3.51 billion worth of deals for 23 ships this year. (Yonhap)