Report: DSME’s Bailout Moves Forward as Court Rejects Investors’ Appeal

 South Korean shipbuilding major Daewoo Shipbuilding and Marine Engineering (DSME) is finally on track to get its USD 6 billion of fresh funds now that the Busan court has dismissed the appeal from a group of individual investors to the bailout plan, Korean newspaper the Pulse reports.

As stipulated in the rescue plan, half of the shipyard’s commercial papers are expected to be converted into equity with the rest being rolled over. DSME’s creditors Korea Development Bank (KDB) and Export-Import Bank of Korea (KEXIM) will in exchange provide the company with KRW 2.9 trillion (USD 2.6 billion) of fresh funds.

As disclosed, the transaction would push the debt ratio to 300%, compared to 2,732% at the end of 2016.

The creditors’ restructuring plan, revealed in late March 2017, sets out three key principles – debt restructuring should come first, financial assistance should follow later, and all stakeholders should bear the burden of losses.

However, the plan needed all bondholders to be on board with the plan before it moves forward.

DSME’s main debt holder, National Pension Service (NPS), which holds some 30 percent of the company’s corporate bonds, approved of the debt rescheduling on April 17. Later the same day, the company’s remaining investors gave their nod to the proposal.

The cash-strapped shipbuilder bounced back to profit in the first quarter of 2017, following stringent self-rescue efforts which included workforce reduction and asset sales.

The company’s operating profit for the period reached KRW 291.8 billion compared to an operating loss of KRW 38.1 billion a year before.

A similar turnaround was reported for DSME’s net income which reached KRW 261.3 billion for the quarter ended March 31, 2017, against a net loss of KRW 3.4 billion seen in the same three-month period in 2016.

Although its profits increased, the company informed that its revenues dropped by 20 percent year-on-year to KRW 2.78 trillion.

World Maritime News Staff