Court receivership looms larger over STX Offshore & Shipbuilding

Creditors of STX Offshore & Shipbuilding Co. are moving to put the midsize local shipyard under court receivership this month, ending their yearslong financial aid, amid ongoing efforts to revamp the ailing industries, such as shipping and shipbuilding, industry sources said Wednesday.

According to the sources, the creditors, led by the state-run Korea Development Bank, will discuss later in the day whether to extend a lifeline to the financially troubled shipbuilder. But the sources said the creditors have already reached a consensus to place the shipyard under court receivership.

STX Shipbuilding, once the country's No. 4 shipbuilder, has been under the control of its creditors since April 2013, in line with a protracted slump in the shipbuilding sector.

STX Shipbuilding was affiliated with the now-defunct STX Group that had a business portfolio that ranged from construction and shipping to shipbuilding and energy.

The creditors had provided over 4 trillion won ($3.36 billion) to the shipyard, but it is still reeling from losses.

Last year, the shipyard logged an operating loss of 314 billion won following a loss of 1.5 trillion won the previous year.

Its debt owed to financial institutions reached 6 trillion won.

Creditors extended additional aid of 450 billion won to the shipyard late last year and sought to reorganize STX Shipbuilding's business portfolio to focus on tanker ships and small-sized LNG carriers.

Should the shipbuilder be put under court receivership, its creditors have to set aside an additional 2.8 trillion won in loan-loss reserves. In particular, KDB and the Export-Import Bank of Korea, the shipbuilder's two major creditors, are required to set aside over 2 trillion won in provisions against bad loans extended to STX Shipbuilding.

Local shipyards have been suffering massive losses due to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump.

The country's top three shipyards -- Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. -- suffered a combined operating loss of 8.5 trillion won last year, and a huge chunk of the loss, some 5.5 trillion won, came from Daewoo Shipbuilding.

Meanwhile, Financial Services Commission Chairman Yim Jong-yong said the government and creditors will push for a speedy restructuring of smaller shipyards in the country.

The government is working to draw up a set of comprehensive measures to overhaul financially shaky shipyards early next month.

Industry sources said local lenders had provided a combined 7.4 trillion won in financial aid to the country's three mid-sized shipyards -- STX Shipbuilding, SPP Shipbuilding Co. and Sungdong Shipbuilding & Marine Engineering Co. -- since they were put under creditor-led restructuring schemes.

By company, a total of 4.5 trillion won has been provided to STX Shipbuilding since April 2014. Creditors have extended a total of 1.1 trillion won to SPP Shipbuilding since May of last year. And Sungdong Shipbuilding received a total of 1.9 trillion won in financial aid from its creditors since May 2010, the sources said. (Yonhap)