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Dongbu-led consortium to take over Hanjin Heavy as debt restructuring nears end

A promotional image of distressed Subic Shipyard, formerly owned by Hanjin Heavy Industries & Construction, which is now under the control of a consortium of Australian shipbuilder Austal and US private equity firm Cerberus. (Hanjin Heavy Industries & Construction)
A promotional image of distressed Subic Shipyard, formerly owned by Hanjin Heavy Industries & Construction, which is now under the control of a consortium of Australian shipbuilder Austal and US private equity firm Cerberus. (Hanjin Heavy Industries & Construction)
An investor group led by South Korean builder Dongbu Corp. signed a deal to acquire a controlling stake in debt-saddled shipbuilder Hanjin Heavy Industries & Construction, filings showed Friday.

According to the filings, a consortium composed of Dongbu and local private equity firm Echoprime Private Equity will buy a combined 55.7 million common shares, or 66.85 percent voting rights, from eight banks including the state-run Korea Development Bank and the Philippines-based BDO Unibank.

This is part of a nearly 83.5 percent stake held by creditors who converted their loan exposure to Hanjin Heavy to equities. Other Philippines-based creditors -- Rizal commercial Banking Corp., Land Bank of the Philippines and Bank of the Philippine Islands -- will remain shareholders of Hanjin Heavy, instead of exercising their tag-along rights to sell their stake.

The KDB, a main creditor, said the deal closing will mark an end to Hanjin Heavy‘s debt restructuring, which commenced in January 2016.

The Seoul-based creditor added that the proposed buyer was discovering the acquisition price, while the deal is subject to due diligence and the government approval.

The news comes four months after a group of Hanjin Heavy shareholders comprising eight lenders selected Dongbu-led consortium as the preferred bidder for the acquisition.

Facing mounting pressure from debt, Hanjin Heavy suffered a capital impairment in 2018. Its financial strain peaked in 2019 as its subsidiary in the Philippines, which operates a shipyard in Subic, filed for a court receivership in 2019. This forced Hanjin Heavy to carry out a capital reduction and allowed the creditors in Korea and the Philippines to take control of the company.

Hanjin Heavy in 2020 logged an operating profit of 51.6 billion won ($46 million), down nearly 40 percent year-on-year.

Hanjin Heavy, trading on the Korea Exchange‘s main board Kospi, fell 5.3 percent Friday, shortly after it was trading 3 percent higher in the early morning trade. Its market cap on Friday stood at 637 billion won.

By Son Ji-hyoung (consnow@heraldcorp.com)
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