Top nine shipyards sit on over 100 trillion won of debt

The combined debt owed by Korea’s top nine shipbuilders exceeded 100 trillion won ($84.7 billion) in 2015, data showed Sunday, adding to concerns about the industry.

The companies, many of which face government-led restructuring programs, owed lenders a combined 102.6 trillion won, up 15 percent from 89.1 trillion won in 2012, according to data compiled by market researcher Chaebul.com. 

“The shipbuilding industry’s crisis has been deepened as the government, the industry and the creditors have missed the ‘golden time.’ The country faces a greater loss to endure,” said Jeong Seon-seob, CEO of Chaebul.com.

As the companies struggle to secure new orders during the first quarter of 2016, their debt grew by 1 trillion won, according to industry sources.

The firms include the world’s three largest shipyards, all Korean -- Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries -- as well as smaller local peers like Hyundai Mipo Dockyard, Hanjin Heavy Industries & Construction, Hyundai Samho Heavy Industries, STX Offshore & Shipbuilding, Sungdong Shipbuilding & Marine Engineering and SPP Shipbuilding.

The nine shipbuilders have signaled their financial troubles since 2013, when their ratios of debt-to-equity reached almost 300 percent.

The overall ratio rose to 471.5 percent as of the end of last year.

The figure is more than triple that of 120.78 percent, an average of 631 Korean companies listed on the KOSPI, the country’s main bourse, according to the Korea Exchange.

The data comes as the major shipyards, including the world’s largest shipbuilder Hyundai Heavy Industry, are mapping out rescue measures to stay afloat and in response to the government’s strong push for restructuring of debt-ridden companies.

On May 27, STX Offshore & Shipbuilding filed for a court-led restructuring scheme despite years of efforts to turn itself around, including over 4 trillion won in financial aid from its creditors.

Beleaguered midsized firms fears for the possibility that they could follow in STX’s footsteps as their creditors are set to decide whether to put the shipyards under receivership or sale later this month.

By company, Daewoo Shipbuilding & Marine Engineering saw its debt surge 53.1 percent over the cited period to 18.6 trillion won, recording the sharpest growth among the major players.

The country’s top three shipyards also suffered a combined operating loss of 8.5 trillion won last year, due largely to increased costs stemming from a delay in the construction of offshore facilities and a worldwide lack of demand. Some 5.5 trillion won of the losses came from Daewoo Shipbuilding.

By Park Han-na (hnpark@heraldcorp.com)