By Kim Yoo-chul
The STX Group, the nation’s mid-tier shipbuilding conglomerate, is struggling to stay afloat due to a series of mishaps, including an acute cash shortage and credit rating downgrades.
In particular, shares of STX Group affiliates have plunged as investors dumped stocks after STX Offshore & Shipbuilding said it had submitted a voluntary debt-rescheduling plan to its creditors as part of efforts to access fresh loans.
STX Offshore dropped by the daily limit of 15 percent to 4,390 won ($3.91) on the Seoul bourse. The shipbuilder also plunged by the daily limit Tuesday.
STX Corp., the group's holding company, also dipped by 10.8 percent to finish at 4,790 won. STX Pan Ocea, the country's leading bulk carrier, closed at 3,500 won, down from 4,680 won on March 26.
STX is going into emergency mode as the prolonged slump in the global shipbuilding and shipping industries has cut its profit margins.
The group is doing everything it can do in order to fix its balance sheet and to prevent it from complete failure.
It has been selling core assets and working with its main creditor bank ― the Korea Development Bank ― after STX didn’t receive any letters of intent (LOI) for a 36 percent stake in the group’s commodities shipping operator Pan Ocean.
STX Offshore & Shipbuilding was separately seeking help from creditors to improve its balance sheet. STX officials said it will continue selling more assets in a bid to streamline its businesses to survive in the market.
``Survival is the key for the group this year. We expect help from creditors to soothe investor concerns surrounding the group. STX will try hard to improve its finances,’’ said an official at the group, Wednesday.
Those efforts may take some time as the group’s restructuring measures are still being questioned by local financial markets.
Korea Ratings ― one of the top-ranked credit ratings agency in Korea ― downgraded corporate bonds of the group’s four main affiliates ― STX, STX Pan Ocean, STX Offshore and STX Heavy Industries ― to BBB minus from a previous BBB plus.
``Despite various measures to improve its finances, we still think it’s too early to talk about the business recovery of the group. It actually has large liquidity problems,’’ said Korea Ratings in a statement.
The agency maintained its outlook on STX Energy and STX Solar, but included the two affiliates on its negative watch list.
NICE Investors Service, another local credit ratings agency, maintained its BBB minus view on the corporate bonds of STX and STX Offshore, but signaled a possibility to cut its rating on the affiliates according to their situations.
``It’s safe to say that the group’s liquidity problems have intensified and expanded. The problem is the group’s key units were seeking financial support from creditors,’’ NICE said in its statement.
The group recently raised 1.13 trillion won through the strategic sale of a controlling stake in Singapore-listed affiliate STX OSV Holdings and a 43 percent share of another unlisted affiliate STX Energy. The group earlier said it was seeking to raise 2.5 trillion won ($2.23 billion).
STX Pan Ocean, STX Offshore and STX combined have some 1.6 trillion won in debt maturing this year, representing about 20 percent of their current outstanding debt, said analysts in Seoul.
The Korea Development Bank earlier said it had considered buying the 36 percent stake if the group failed to find a buyer for Pan Ocean. After the failure, the bank held a creditors’ meeting, but no agreement has yet been reached.
STX has grown fast over the past few years thanks to aggressive acquisition deals amid the industry’s upturn cycle.
“Chairman Kang Duk-soo made one simple mistake. The shipbuilding industry is much like the semiconductor industry, which is highly volatile and cyclical upon economic situations. Unfortunately, he was too much ambitious,’’ said an official at a local shipbuilding industry who asked only to be identified as Cho.