Daewoo Ship rises after creditors pledge to provide funding

Daewoo Shipbuilding & Marine Engineering Co., the world's second-biggest shipyard, rose the most in two months in Seoul trading on expectations creditors?plan to provide 4.2 trillion won ($3.7 billion) in funds will help ease concerns about its cash position.

Shares of Daewoo Shipbuilding jumped as much as 8.5 percent, the biggest intraday gain since Aug. 25, to 7,400 won and traded at 7,050 won as of 9:56 a.m. in Seoul. The stock has fallen 62 percent this year after reporting big losses due to delivery delays and order cancellation in the last two quarters.

"Daewoo Shipbuilding has overcome its biggest obstacle," said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. "The next thing we need to watch for is whether offshore projects are completed and delivered next year. That will help improve the company's cash flow."

Daewoo Shipbuilding is the worst performing stock on the Kospi 200 index this year as delays in delivering offshore drilling and production units have forced the company to load up on debt. The shipbuilder is selling non-core assets, reducing its operational presence at a loss-making Romanian shipyard and shedding workers as it hustles to raise cash after posting its biggest-ever quarterly loss earlier this year.

Creditors of Daewoo Shipbuilding & Marine Engineering Co., including Korea Development Bank and Export-Import Bank of Korea, said Thursday they will provide 4.2 trillion won in loans and equity. The shipyard in return will reduce its exposure to the offshore business, cut staff and sell or liquidate overseas units. (Bloomberg)