Cash-strapped DSME bags $250m deal

Cash-strapped Daewoo Shipbuilding & Marine Engineering, a major South Korean shipbuilder whose fate hangs on a meeting of its creditors later this month, has secured a $250 million deal to build three very large crude carriers, the company said Tuesday.

Daewoo will deliver three 318,000-ton VLCCs to Maran Tankers Management, a unit of Greece’s largest shipper Angelicoussis Shipping Group by 2018.

Since 1994, Angelicoussis, a longtime contractor of DSME, has ordered 92 ships and Daewoo is currently building 18 ships for the Greek company. Last year, DSME -- which is desperate to bag new deals -- also received orders for two liquefied natural gas vessels and two VLCCs in June, followed by a LNG-FSRU (floating storage regasification unit) order in December.

The deal was finalized amid concerns over the fate of a new rescue plan that will be decided when the company’s creditors meet on April 17 and 18, ahead of its April 21 deadline to repay 440 billion won ($393 million) of debt.

Industry watchers had warned that uncertainties from the pending plan might undermine the shipbuilder’s ability to secure new deals.

The main creditors of DSME, led by Korea Development Bank, announced a new financial aid plan last month. According to the plan, KDB and The Export-Import Bank of Korea will inject fresh liquidity worth 2.9 trillion won into the company, but only if debtholders agree to swap 2.9 trillion won of debt into equity and give a three-year grace period on repayment of the remaining debt.

If the creditors fail to agree on the debt-for-equity swap plan, the ailing shipbuilder will be placed under a prepackaged plan that combines debt workout and court receivership.

New deals, especially ones with advanced payment, are important for the company to relieve liquidity issues, as they would help the company repay its maturing debts.

An official at the company declined to comment on the exact size of advanced payment for the Maran deal, as details of the contract are confidential, but usually it is between 10 percent and 20 percent of the total contract value.

Daewoo is expected to clinch another deal worth $1.6 billion to build seven LNG-FSRUs for Excelerate Energy, a Texas-based shipper, later in April. It signed a letter of intent with the US company in February.

This year, DSME has so far secured a total of $770 million worth of deals to build two LNG and five VLCCs.

The company aims to bag $5.5 billion of deals this year, while its creditors have a moderate goal of $2 billion.

Meanwhile, Daewoo has been in negotiations with Angola’s state oil company Sonangol, which has been delaying payments for two completed drilling platforms.

If the negotiations go through, the company will be able to receive 1 trillion won from Sonangol.

By Park Ga-young (gypark@heraldcorp.com）