S.Korea Hanwha seeks to delay Daewoo shipyard deal

South Korea's Hanwha Group, the preferred buyer for a controlling stake in Daewoo Shipbuilding, is seeking to delay payment for the acquisition due to funding constraints, raising concerns the deal could collapse. Hanwha and Daewoo's top shareholder, Korea Development Bank (KDB), are in a standoff after Hanwha proposed the delay. An official at KDB said on Wednesday the state-run bank would have to consider canceling the deal, estimated at up to $5 billion.
"(A delay) will be impossible," said the KDB official, whose team is overseeing the Daewoo Shipbuilding sale. "We cannot but question the sincerity of the buyer's intention if it wants to change agreed terms without making full efforts to meet them."
Hanwha, a chemicals-to-brokerage group with roots in explosive maker Hanwha Corp, said on Wednesday worsening financial market conditions had made it almost impossible to raise financing and that the group wanted the payment to be made in tranches or delayed.
In a preliminary agreement, Hanwha pledged to make the full payment for Daewoo by the end of March, 2009. The price has not been disclosed but local media have reported it was more than 6 trillion won ($4.5 billion).
"Financial investors and other institutions which had promised to fund the deal are withdrawing," said Ju Cheol-beom, a spokesman for Hanwha, a chemicals-to-brokerage business group. "Our asset sale plans also hit a snag."
Hanwha also said it could not sign a final contract without completing due diligence on Daewoo's assets, including overseas units whose financial conditions were not known.
Due diligence has not started due to opposition from Daewoo's labour union, which has asked for job security, guaranteed wage and other incentives.
Hanwha and KDB previously agreed to sign a final contract by Dec. 29.
KDB picked Hanwha as a preferred bidder in October for a 50.4 percent stake in Daewoo, the world's No. 3 shipbuilder.
Although Daewoo's high-margin energy vessel business could give Hanwha a new growth engine, the ongoing global downturn and a slowing industry outlook means a rough road ahead for the buyer.
At 0224 GMT, shares in Daewoo Shipbuilding fell 7.07 percent to 17,100 won, leading the wider market's .KS11 2.21 percent loss. The current price values the 50.4 percent Daewoo stake to be sold at 1.65 trillion won.