Daewoo Shipbuilding faces W4tr liquidity crisis in 2018

[THE INVESTOR] South Korea’s troubled shipbuilder Daewoo Shipbuilding & Marine Engineering will be hit by a liquidity crunch again in 2018 despite its ongoing self-rescue efforts and debt restructuring by creditors, report showed on Aug. 4.

DSME is expected to suffer a severe liquidity shortage of 4.55 trillion won (US$4.08 billion) in 2018, according to a due diligence report on the shipbuilder conducted by Samjong KPMG, an accounting firm. 

The result comes after DSME’s largest shareholder Korea Development Bank and main creditor Export-Import Bank of Korea injected a total of 4.2 trillion won liquidity into the shipbuilder, which has been suffering operation and financial losses amid the global slowdown.

According to the report, the ailing shipyard’s cash flow will further deteriorate in the next two years since a credit crisis first occurred with a cash shortage of 1.73 trillion won in 2015.

Samjong KPMG expects the amount to snowball to 2.34 trillion this year and 3.64 trillion won in 2017.

The dramatic drop in liquidity in 2018 is largely due to a sharp decline in ship orders last year and maturing debts.

DSME needs to repay corporate debts and commercial paper worth 1.8 trillion won which matures between the second half of this year and 2018.

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