A local S. Korea high court rejected appeal from a group of individual investors, removing the last stumbling block for a fresh $6 billion debt relief and bailout program for Daewoo Shipbuilding & Marine Engineering Co. (DSME).
A government-led bailout package that required all creditors and bondholders to agree to push back the maturity, lower borrowing rates, and convert debt into equity according to their share had been put on hold as some of the individual investors appealed to a Busan court.
The rescheduling scheme is now set to go, and half of its existing debt would be converted into equity in DSME by next month to significantly push down the debt ratio to 300 percent from 2,732 percent as of the end of December, creditors’ sources said.
DSME would be able to speed up its normalization efforts upon receiving fresh funding of 2.9 trillion won ($2.6 billion) pledged by state lenders and rescheduling in existing 3.9 trillion won debt through debt-to-equity swap, rollover and lower rates from all private lenders and bondholders.
The shipbuilder’s largest shareholder Korea Development Bank (KDB) plans to launch a committee consisting of civilian experts to examine DSME’s management status quo. Private lenders would also join efforts to salvage the company. They agreed to extend refund guarantee of up to $500 million for vessels DSME wins over the next year to ensure security of new orders.
The KDB had offered refund guarantee on the order of $250 million that DSME won on April 4 to build three very large crude-oil carriers (VLCCs) from Maran Tankers Management Inc., a subsidiary of Greek shipping giant Angelicoussis Shipping Group. Private lenders would guarantee future orders.
The shipbuilder charged with accounting fraud on Thursday corrected its financial statements of last eight years from 2008 to the first quarter of 2016 upon the order of Securities & Futures Commission.
Its operating profit of 486.2 billion won in its 2012 financial statement was revised to 72 billion won in operating loss, and 119.7 billion won in net income in its 2008 statement has also been fixed to 83.2 billion won in net loss. DSME was initially known to have recorded losses for four consecutive years from 2013 to 2016, but the correction shows that it made losses for five straight years from 2012 to 2016.