Creditors still undecided on refund guarantee for Daewoo’s latest deal

Ships are under construction at the Daewoo Shipbuilding & Marine Engineering Co. (DSME) shipyard in Geoje, South Korea, on Wednesday, April 22, 2009. Daewoo Shipbuilding & Marine Engineering Co. is the world's third-largest shipyard. Photographer: Seokyong Lee/Bloomberg News

Creditors of Daewoo Shipbuilding & Marine Engineering Co., a troubled shipbuilder here, still remain undecided over afor the shipyard’s latest deal, further complicating troubles for one of the country’s major shipyards, industry sources said Monday.

On April 4, Daewoo Shipbuilding clinched a US$250 million deal to build three very large crude carriers (VLCCs). Under the deal with Maran Tankers Management, a unit of Greece’s largest shipper Angelicoussis Shipping Group, Daewoo Shipbuilding will deliver the 318,000-ton VLCCs by 2018.

The deal came as the shipyard is suffering from a sharp decline in new orders amid a protracted industrywide slump.

“We are still talking about (this), and the state-run creditors and commercial lenders have to narrow their differences on the terms,” a source said, asking not to be named.

RG had been a sticky issue among creditors of Daewoo Shipbuilding in their efforts to resuscitate the company teetering on insolvency with a 6.7 trillion won ($5.94 billion) rescue deal, as they have been hesitant about volunteering RG, fearing colossal financial burdens should the company become unable to fulfill new orders.

RG is a form of security for the ship purchaser, which usually makes advance payments on an order. In case the ordered vessel cannot be delivered, the bank that has taken on the RG of the shipbuilder would make the refund. Without such a guarantee, it’s virtually impossible for a shipyard to get orders.

Last month, the creditors, led by state-run Korea Development Bank, announced a fresh rescue package for the ailing shipbuilder, the second round of bailouts for the shipbuilder that has been suffering from severe liquidity problems over heavy losses in its offshore projects.

After weeks of negotiations, Daewoo Shipbuilding’s bondholders agreed to the rescue package, paving the way for the shipyard to receive a fresh cash injection of 2.9 trillion won.
Source: Yonhap

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