Daewoo Shipbuilding losses should be shared by stakeholders

South Korea's chief financial regulator said Tuesday that stakeholders of Daewoo Shipbuilding & Marine Engineering Co. should shoulder losses, a precondition for another round of rescue package for the cash-strapped shipbuilder.

Yim Jong-yong, chairman of the Financial Service Commission, made the remarks at a parliamentary committee when asked whether the government is considering another round of capital injection to help rescue Daewoo Shipbuilding. 

Yim told lawmakers that the government has been reviewing an "additional restructuring plan" with creditors of Daewoo Shipbuilding under "several preconditions."

"The basic idea is that all stakeholders must shoulder losses," Yim said.

Unless the stakeholders agree to the idea, Yim warned that Daewoo Shipbuilding may be placed under a debt-workout program.

Daewoo Shipbuilding has been saddled with a deepening liquidity shortage amid a plunge in new orders.

The shipbuilder suffered an operating loss of 1.61 trillion won ($1.44 billion) last year following an operating loss of 2.94 trillion won in 2015.

Its net loss narrowed to 2.71 trillion won last year from a loss of 3.3 trillion won a year earlier with sales also dipping 15.1 percent on-year to reach 12.74 trillion won, it said.

The pending and sticky problem facing Daewoo Shipbuilding is how to pay off 440 billion won worth of debt due next month. It has to refinance or pay off a total of 940 billion won worth of debt this year and 550 billion won next year.

Creditors of Daewoo Shipbuilding are set to map out a rescue package worth up to 3 trillion won this week, in exchange for more bold self-rescue efforts and huge debt rescheduling among creditors and bondholders, as the company is feared to face a deepening liquidity shortage amid a plunge in new orders.

In late 2015, the creditors, led by the state-run Korea Development Bank, announced a rescue package worth 4.2 trillion won, a huge chunk of which has already been spent to salvage the shipyard through debt-for-equity swaps and other arrangements. 

Yim said the government regrets having to once again map out
rescue measures for Daewoo Shipbuilding, despite the 2015 scheme.
 
Before the government decides to inject new funds into Daewoo
Shipbuilding, the shipbuilder's labor union must agree that it
won't stage a strike, Yim said.

Daewoo Shipbuilding is expected to face gloomy earnings this
year because of its heavy reliance on offshore orders, which have
dropped due to a fragile recovery in the global economy.(Yonhap)