C& Heavy May Enter Workout Program
By Lee Hyo-sik
Staff Reporter
C& Heavy Industries, a flagship unit of the cash-strapped C& Group, is expected to ask Woori Bank and other creditors to place it under a workout program this week in a bid to stay afloat amid the deepening credit squeeze and a global economic downturn.
If creditors accept its request, the shipbuilder will undergo drastic restructuring in return for the extension of loan maturities and an injection of fresh capital. The main creditor, Woori Bank, recently demanded that C& Heavy Industries submit a self-rescue plan, after the company had failed to pay back maturing loans for the past two months.
``We received the self-restructuring scheme from the shipbuilder. We are currently studying the feasibility of the plan. If the company files for a workout program, we will hold a meeting with other creditors and decide what to do,'' a Woori Bank official said.
Industry experts expect C& Heavy Industries to apply for the restructuring program Wednesday, when C& Group holds a bidding for its ailing construction arm, Woobang Engineering, in an attempt to sell the builder at a higher price.
If 75 percent of creditors approve the plan, the shipbuilder will have its debts rescheduled or receive new loans. But in return, the company will be required to sell assets and take a range of self-rescue measures, along with a management reshuffle.
The Woori official said even if C& Heavy Industries enters the workout program, creditors will not likely provide fresh loans, adding
it may not be easy for over 10 creditors to reach a consensus on the issue because of differing opinions.
``If the firm does not accept our terms for restructuring and does not file for the workout program, we will seize its properties and sell them through a public auction in accordance with the law to recover loans,'' he said.
Once-booming small-and medium-sized shipbuilders have been suffering from cash flow problems in recent months in the wake of global financial market turmoil. Additionally, increasing steel and other raw material prices have begun hitting shipbuilders hard, particularly small ones, while shipping companies have reduced new orders and canceled existing ones as business slows on the worldwide economic downturn.
The government and creditor banks are moving to put about 300 small-and medium-sized shipbuilders under the microscope for drastic restructuring to prevent chain reaction bankruptcies and its fallout on the economy
C& Group has been grappling with the liquidity shortage since October, as it borrowed excessively over the years to expand its business into a number of sectors, including shipbuilding and construction.
More than anything else, its purchase of a 52.88 percent stake in construction firm Woobang in early 2005 for 355.9 billion won hit the group hard, as its value has plunged to 22.5 billion won under a pile of unsold apartments amid the slumping housing sector.
It is estimated that commercial banks and savings banks have extended a total of 1.3 trillion won to 41 subsidiaries of C& Group.