Daewoo Shipbuilding faces rugged road to paying off maturing debt

Daewoo Shipbuilding & Marine Engineering Co., a major shipyard in South Korea, has to pay off or refinance up to 1 trillion won ($869 million) worth of debts that mature this year, but the shipbuilder’s financial status is not good enough to deal with the situation amid the dearth of new orders and a delay in the delivery of drill ships, industry sources said Tuesday.

According to the sources, Daewoo Shipbuilding has 440 billion won worth of debts scheduled to be due in April, 300 billion won in July and 200 billion won in November.

But the shipyard doesn’t have enough cash to pay off such maturing debts.

Daewoo Shipbuilding has not received any new orders so far this year, although it has recently signed a letter of intent with a US firm to build up to seven floating storage and regasification units.

Under the deal with Excelerate Energy, Daewoo Shipbuilding will receive an order to build one FSRU for the US energy firm in the second quarter of the year, whose value will be between some $200 and $300 million.

But the official contract is expected to be finalized in April.

Adding to its difficulty is that it is facing a delay in receiving 1 trillion won in payment from an Angola oil firm for the delivery of two drill ships.

Daewoo Shipbuilding and Sonangol have been negotiating to resolve the delayed payment since last year, but the delivery was pushed back to this year, according to the sources.

The delivery of the two drill ships was originally scheduled for June and July, respectively, last year.

The payment is one of the key resources that Daewoo Shipbuilding needs to repay its maturing debts.

Earlier this month, the state-run Korea Development Bank, the main creditor for the shipyard, ruled out any additional cash injections into the shipyard, which means that Daewoo Shipbuilding should pay off or refinance the maturing debt on its own.

KDB and another policy lender, the Export-Import Bank of Korea, have so far injected a combined 3.5 trillion won into Daewoo Shipbuilding.

South Korean shipbuilders have been under severe financial strain since the 2008 global economic crisis, which sent new orders tumbling amid a glut of vessels and tougher competition from Chinese rivals.
Source: Yonhap