By Jhoo Dong-chan
Finance authorities consider injecting more funds to debt-ridden Daewoo Shipbuilding & Marine Engineering (DSME) as its corporate bonds worth around 940 billion won ($830 million) are set to mature by the end of this year.
According to business circles, Thursday, the shipbuilder’s corporate debt worth 440 billion won is expected to mature next month, followed by 300 billion won in July and another 200 billion won in November.
DSME said the company would be able to deal with the April bonds but worried it may experience a lack of funds in the second half of the year.
Having long suffered a similar liquidity crisis because of a decline in global demand, the government bailed out DSME with 4.2 trillion won in October 2015, but it failed to improve its financial status while recording an operating deficit of over 1 trillion won last year.
Despite the shipyard’s poor performance even after the bailout, the Financial Services Commission (FSC) seems to mull providing cash once again to keep the embattled company afloat.
“We cannot take drastic measures until the next administration decides what to do about DSME after the May election, but DSME may face big problems before the decision,” an FSC official said.
The FSC and state-run Korea Development Bank (KDB), DSME’s main creditor, asked accounting firm Samjong KPMG to estimate how much funding is necessary to salvage the troubled shipbuilder, and Samjong said it would cost up to 3 trillion won for the company to stay alive.
Public responses are skeptical about the second-round bailout plan.
“In December, the government said it would go by the book without contributing new cash to DSME,” an industry insider said. “But it shifted its position after just three months, claiming the firm needs another bailout program. I am very doubtful whether the government has a long-term plan to handle the issue.”
Daishin Securities also had a negative outlook for the company.
“Considering the size of debts that have to be repaid this year, DSME is likely to go through the workout program. Creditor banks may suffer huge losses over debts with DSME,” a Daishin researcher said.
Some worry creditors would suffer losses amounting to 57 trillion won if DSME goes bankrupt. Included among its major creditors are KDB and the Export-Import Bank of Korea.