By Lee Hyo-sik
Creditors of Dongbu Steel are having a hard time in finding bidders for the struggling steelmaking unit of Dongbu Group amid the prolonged global steel industry slump.
POSCO, Hyundai Steel and other local steelmakers have expressed no interest in acquiring Dongbu, while companies in China, India and other countries have also shown a lukewarm response, according to industry analysts, Monday.
If the state-run Korea Development Bank (KDB) and other creditors fail to find a buyer this time, they may have to retain Dongbu Steel under their management for quite some time, the analysts said. The troubled steelmaker could end up like Daewoo Shipbuilding & Marine Engineering, which has been under creditor management for the past 15 years.
KDB holds a 25.98 percent stake in Dongbu, followed by Nonghyup Bank with 9.36 percent and Shinhan Bank with 5.17 percent. The company came under a creditor-managed workout program last October after failing to pay maturing debts.
To dispose of Dongbu, KDB has contacted POSCO and Hyundai Steel, while on behalf of creditors, Nomura Securities have been talking to multiple steel mills in China and India. But none of them have reportedly expressed interest.
Creditors initially planned to hold a bid later this month, but will likely be forced to delay it.
“POSCO, Hyundai Steel and their foreign rivals have been struggling to deal with the worldwide industry slump,” said an analyst, who declined to be named. “All of them are scrambling to dispose of noncore units and assets to raise cash amid deteriorating financial health. Acquiring Dongbu Steel is certainly not an option for them.”
While attending an event at the COEX on Jan. 6, POSCO Chairman Kwon Oh-joon said it was highly unlikely for his company to find synergy with Dongbu Steel, indicating that the world’s fourth-largest steelmaker was not keen on buying a smaller rival.
“As our chairman recently indicated, we aren’t even considering taking over Dongbu,” a POSCO spokesman said.
The steelmaker has been struggling to bolster its deteriorating bottom line over the past few years as it has failed to generate much in profits. POSCO has been selling real estate and other non-essential assets to secure much-needed cash, while shutting unprofitable subsidiaries.
Hyundai Steel, the steelmaking unit of Hyundai Motor Group, also said it is not in a position to acquire Dongbu. It was earlier speculated that the company might purchase it to expand its size to better compete with industry leader POSCO.
At the gathering of CEOs of steel companies here, Jan. 11, Hyundai Steel Vice Chairman Woo Yu-cheol also said the company never considered acquiring the troubled steelmaker.
“As our vice chairman indicated, we do not seek to acquire Dongbu,” a company spokesman said.
Worse, Dongbu Steel creditors are also facing a difficulty in finding potential bidders abroad.
“The Chinese steel industry has been undergoing drastic downsizing to reduce its overcapacity,” the analyst said. “India has also been grappling with excessive oversupply amid falling demand.”