South Korea’s government on Thursday announced a fresh Won2.9tn ($2.6bn) financial support for cash-strapped Daewoo Shipbuilding and Marine Engineering as the world’s second-largest shipbuilder continued to suffer huge losses amid a prolonged industry slump.
The new rescue package will be led by state-run banks – Korea Development Bank and Export Import Bank of Korea – to help Daewoo tide over its deepening financial crisis while other creditors will also be asked to provide support through debt-to-equity swaps and debt rollovers.
The additional support comes a year and five months after the company was thrown a Won4.2tn lifeline to rescue the troubled shipbuilder, despite growing criticism that the continued aid would send a wrong signal of “too big to fail” to the market.
Daewoo reported a Won2.7tn net loss last year from a Won3.3tn loss in 2015 with sales dropping 15 per cent to Won12.7tn. It is struggling to pay back Won940bn in maturing bonds this year including Won440bn next month amid a dearth of new orders and delayed deliveries of offshore oil rigs.
The company received a meagre $1.6bn worth of new orders last year, far short of its $6.2bn target. This year, it aims to win $5.5bn of new orders but has received just $520m of new orders so far to build two LNG (liquefied natural gas) ships and VLCCs (Very Large Crude Carriers).