DSME may face crisis in April due to debts

By Park Hyong-ki

Daewoo Shipbuilding & Marine Engineering (DSME), once one of Korea’s biggest shipbuilders, faces a potential crisis, despite claims to the contrary.

The financial authority here has assured the market that the company faces no such scenario where it could default on its debt.

But the question remains as to whether Daewoo can refinance and repay 440 billion won owed to investors next month.

With the company running out of money without any new projects that can improve cash flow, the market remains concerned over the lack of liquidity.

The state-run Korea Development Bank (KDB) and Export-Import Bank of Korea injected more than 4 trillion won into DSME in 2015. KDB is DSME’s main creditor bank and largest shareholder with a 79 percent stake.

But the company has used most of that capital, and barely has enough money to repay its April debt.

Even after it pays debt due in April, it still needs to refinance debt worth 500 billion won due in the second half of this year. In total, the company needs about 1 trillion won to repay its debt this year.

The company raised about 1.8 trillion won via new shares from KDB last December, according to a regulatory filing.

The purpose of the fundraising was to improve its finances, DSME said.

“Daewoo Shipbuilding will exert efforts to resolve its liquidity problem this year by securing funds from new project orders and implementing self-rehabilitation,” a KDB official said. “KDB and other creditor banks will closely monitor the company, and manage both its long and short-term liquidity.”

KDB CEO Lee Dong-geol said last month at a National Assembly meeting, “KDB is looking into ways to secure liquidity for DSME. It will come out with a plan in late March.”

DSME’s only hope at this point is to receive payment for two drill ships the company built for Sonangol, Angola’s state-run oil company. DSME secured the $1.2 billion order in 2013. But delivery of those ships has been delayed because Angola is in a financial crisis because of low oil prices.

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