DSME denies rumors of capital reduction plan

Financially troubled Daewoo Shipping and Marine Engineering on Friday denied the rumor that the company would reduce its share capital as part of moves to improve its financial status.

The ailing shipbuilder made a public announcement that nothing had been determined over its financial plans and that various options were under discussion with creditors to improve the financial structure. 

“(The company) will again offer an announcement as soon as concrete financial plans are finalized,” said the company.

Speculation grew over the possible capital reduction after a local news outlet reported Thursday that the company was mulling cutting the impaired capital by the end of this year in a bid to avoid being delisted next year.

As of late June, DSME’s total shareholders’ net equity plummeted to about minus 1.23 trillion won ($1.1 billion).

The company’s largest shareholder, Korea Development Bank owns 49.7 percent of the shares, followed by Financial Services Commission with 8.5 percent and employee stock ownership association with 2 percent.

As part of the plans to support the normalization of DSME, the state-run bank unveiled its plan last year to increase capital by 2 trillion won through a share issuance, and a cash injection by KDB of 4.2 trillion won.

Of the 2 trillion won, about 400 billion won has already been issued.

On Wednesday, the debt-ridden company avoided a forced exit from the stock market as the Korea Exchange decided to give a grace period of one year to improve its financial health.

Trading of the stock has been halted since mid-July after company’s executives were indicted on charges of embezzlement and breach of duty. Trading will still be halted during the grace period until Sept. 28 next year.

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