Korean banks opt for cliff-hanging loan relief for Samsung Heavy Industries

In a rare move to keep troubled company on its toes, Korean commercial banks are opting to grant life line for three months instead of typical one year when rolling over debt dues for Samsung Heavy Industries.

According to banking sources on Wednesday, KB Bank set the next due date for one-year loan of 100 billion won ($85 million) whose due date was up on June 7 for three months instead of granting another year in sync with state-led creditors’ relief program for the shipbuilder in return for its pledged self-rescue plan of raising 1.5 trillion won through asset sales and cost-cutting efforts. The shipbuilder on Wednesday announced that it would scale down workforce and organization by up to 40 percent, predicting income to halve from past earnings of around $10 billion over the next few years.

Shinhan Bank also is mulling similar nail-biting terms when extending the due period of 150 billion won Samsung Heavy Industries needs to pay up by Friday.

A bank official said “the self-rescue plan submitted by Samsung Heavy Industries is nothing but a plan and it remains to be seen whether it can bear fruit.” Banks want to reserve more lasting action until they see latest due diligence report by Samjong KPMG later this month.

Banks have been advised by financial authorities of synchronized action after the government decided to create a fund to recapitalize state banks to bail out and rebuild shipbuilding and shippers in trouble. “We have to act contingently due to questionable outlook as the company fails to pull in new work.”

Industry observers believe the rare bank actions may be aimed to stave off labor protest to restructuring plans and pull in more aggressive financial support to the shipbuilder from cash-rich Samsung companies. Labor representative of Samsung Heavy declared to go on a strike against the streamlining plan.

Samsung Heavy Industries has short-term debt worth some 2.9 trillion won in its books that are required to be repaid by the end of next March, including 200 billion dues to NH Bank by next month.

Given 900 billion won installment dues in long-term debt, the shipbuilder needs to pay up a total of 3.8 trillion won by then.
Source: Pulse