Bondholders skeptical of Daewoo Shipbuilding’s rescue plan

The National Pension Service and the country’s major institutional investors are crying foul over the latest rescue package for embattled Daewoo Shipbuilding & Marine Engineering Co., as the plan favors the shipyard’s key creditors, mostly state-run banks, industry sources said Tuesday.

Last week, the creditors of Daewoo Shipbuilding, led by the state-run Korea Development Bank, announced a fresh rescue package worth 6.7 trillion won ($6.02 billion) for the ailing shipbuilder, but only if all stakeholders agree to a debt-for-equity swap plan.

The huge rescue measures represent the second round of bailouts for the shipbuilder that has been suffering severe liquidity problems over heavy losses in its offshore projects.

Under the rescue package, Daewoo Shipbuilding will receive new loans worth 2.9 trillion won if lenders and bondholders agree to swap 2.9 trillion won of debt for new shares in the shipbuilder.

Bondholders are also required to give a three-year grace period on repayment of the remaining debt.

Unless they agree on the debt-for-equity swap plan, Daewoo Shipbuilding will be placed under a new corporate rehabilitation program, which is a combination of debt workout and court receivership, the creditors said.

Daewoo Shipbuilding plans to hold a meeting for its bondholders on April 17-18 but getting an agreement from them for the debt-for-equity swap may not be easy.

According to the sources, non-state lenders and other investors hold a combined 1.55 trillion won worth of debt sold by Daewoo Shipbuilding, a huge chunk of which is held by the National Pension Service and other pension funds.

“The rescue package is aimed at preventing creditors from facing the repayment of massive refund guarantees of prepaid fees to Daewoo Shipbuilding,” said a source.

The KDB-led creditors are also threatening to implement a harsher plan for Daewoo Shipbuilding that will eventually lead to more losses for bondholders if the proposed rescue plan is not approved.

The sources said the government and the state banks are trying to twist the arms of bondholders and others to accept losses that stem from the failure of corporate restructuring.

Some stock investors have already filed a 100 billion won compensation suit against Daewoo Shipbuilding claiming that they have suffered a massive loss due to the shipyard’s accounting fraud.

Trading in Daewoo shares has been halted since last July.

Meanwhile, non-state lenders of Daewoo Shipbuilding agreed to join the proposed rescue plan for the shipyard on the condition that the bondholders approve the proposed debt rescheduling — a debt for equity swap and a 3 year grace period on debts, according to the sources.

The KDB said it will receive a written pledge from non-state lenders this week for the debt rescheduling that they will swap 560 billion won worth of loans into Daewoo Shipbuilding’s stocks and allow the shipyard to postpone the repayment of some 140 billion won by three years.
Source: Yonhap