STX shipyard heading for court receivership
By Kim Jae-won
Creditors of STX Offshore & Shipbuilding said Wednesday that they have no other choice but to put the debt-ridden, nonviable shipbuilder under court receivership later this month.
The Korea Development Bank (KDB), the lead creditor, said that they will have STX file for court receivership as the shipbuilder is unable to generate operating profits to pay off maturing debt.
“Considering the company’s financial situation, we think it may be unable to make a debt payment due at the end of May,” said KDB in a statement. “In particular, the company is in danger of being forced to stop building ships as foreign ship owners are seeking to seize its assets in compensation lawsuits.”
The announcement came as the nation’s shipbuilders are going through tough corporate restructuring programs after being hit hard by a reduction in orders from global ship owners and failures in the marine plant business. Daewoo Shipbuilding & Marine Engineering (DSME), Hyundai Heavy Industries (HHI) and Samsung Heavy Industries (SHI) are all in talks with their creditors over ways to keep afloat, including massive layoffs and sales of noncore assets.
Market watchers worry that the collapse of STX will further hit local lenders already suffering from tremendous bad loans extended to ailing shipbuilders and shippers.
KDB said that local banks’ additional losses related to STX will reach over 2 trillion won if the shipbuilder and its affiliates file for court receivership. KDB, the Export-Import Bank of Korea (Eximbank) and NongHyup Bank will be the biggest losers while Woori Bank, Shinhan Bank and KEB Hana Bank will face limited losses.
STX’s financial situation has worsened largely due to its excessive investments in overseas builders and shipbuilders, as well as moral laxity in the company’s management, including former Chairman Kang Duk-soo.
In 2014, a Seoul district court sentenced Kang to six years in prison for committing accounting fraud worth 584.1 billion won and embezzling 55.7 billion won of corporate funds.
The creditors had provided over 4 trillion won to STX, but it is still reeling from losses. Last year, the shipbuilder logged an operating loss of 314 billion won, following a loss of 1.5 trillion won the previous year. Its debt to financial institutions has reached 6 trillion won.
In 2015, creditors extended 450 billion won in additional aid to the company, seeking to reorganize STX’s business portfolio to focus on tankers and small LNG carriers, but have since concluded that there is little chance the loans will be repaid.