Daewoo Shipbuilding's self-restructuring program wins creditors' approval

Creditors of Daewoo Shipbuilding & Marine Engineering may approve the embattled shipbuilder's self-restructuring plan worth 5.2 trillion won ($4.47 billion) Wednesday, industry sources said Tuesday.

The shipbuilder has been under pressure from its creditors, led by state-run Korea Development Bank, to come up with a stronger rehabilitation scheme to tide over a protracted slump in the global shipbuilding segment and mounting losses.

Under the plan presented to the creditors, Daewoo Shipbuilding intends to sell two of its five floating docks, which could translate into a 30-percent cut in its overall production facilities.

The scheme also calls for further reducing its workforce and splitting off some of its profitable business divisions for a stock market debut.

Last year, the shipyard drew up a 1.85 trillion won self-rehabilitation plan in return for 4 trillion won in financial aid.

The latest measures also include a cut of up to 20 percent in wages to employees and a further reduction in the number of executives.

Daewoo Shipbuilding plans to advance the timetable for its workforce reductions and may cut more employees. Earlier the company said it would slash its workforce by an additional 2,300 to 10,000 by 2019. Last month, the shipyard named a preferred bidder to sell its headquarters building in downtown Seoul for 180 billion won.

The second batch of self-rehabilitation steps comes as a drop in new orders is expected to continue down the road.

In a related move meant to enhance its competitiveness in the global market, Daewoo Shipbuilding showcased its re-liquefaction technology to its customers which can store vaporized LNG as cargo and re-liquefy it for fuel. Daewoo claims that the technology can help save up to 4 billion won annually per ship.

In 2014, the shipbuilder secured orders to build 35 LNG carriers equipped with the so-called partial re-liquefaction system, which accounted for 56 percent of the total.

Meanwhile, Hyundai Heavy Industries has also promised to implement stronger self-rescue schemes to stay afloat.

The country's top three shipyards, which also include Samsung Heavy Industries, suffered a combined operating loss of 8.5 trillion won last year due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump.

But a huge chunk of the loss, some 5.5 trillion won, came from Daewoo Shipbuilding. (Yonhap)