Angolan oil firm’s takeover delay deepens DSME’s liquidity woes

Concerns were growing again Monday over liquidity woes of Daewoo Shipbuilding and Marine Engineering, as the Angolan state-run company is likely to delay the takeover of its drill ships once again.

The shipbuilder was planning to deliver the two drill ships to Angola’s state-run oil company Sonangol by this month to receive the remaining contract fee of $1 billion. The initial takeover, which had been scheduled for summer, was postponed to September upon agreement. 

Sonangol, however, has again delayed the takeover, citing financial difficulties.

As part of moves to solve the takeover issue, DSME CEO Jung Sung-leep on Thursday left for Dubai in the United Arab Emirates to hold a negotiation with Sonangol.

“It’s not that the scheduled takeover is canceled. The matter is when the contract fee will be received. (The company) has to wait and see how the negotiation goes,” a DSME official said.

In an attempt to receive the remaining cost, the shipbuilder is seeking to receive 80 percent of the $1 billion won in cash and the rest in stocks.

Sonangol has already established a special purpose vehicle that would manage and run the two drill ships in the future. The Korean shipbuilder will take the shares of this new company, DSME said.

The time, however, is reportedly taking longer than expected for Sonangol to secure the undertaking fund.

While speculation is growing that Sonangol will likely take over the ships by November, financial burden for DSME will get heavier if the takeover is postponed again to next year.

Although DSME does not have corporate bonds that will reach maturity by this year, it does have debt of 940 billion won ($848 million) due next year.

Meanwhile, the Korea Exchange will make a decision Thursday on delisting the shipbuilder.

The review for delisting was decided last month, following revelations that the company violated accounting regulations and that former executives allegedly embezzled the funds and breached their duties.

By Lee Hyun-jeong  (rene@heraldcorp.com)