Bondholders approve bank bailout of South Korea's Daewoo Shipbuilding
Bondholders of South Korea-based Daewoo Shipbuilding & Marine Engineering (DSME) have almost unanimously agreed to swap their debt for equity in order to facilitate the bank bailout of the shipbuilding company.
The decision has paved the way for a $2.6bn bailout for DSME, which is planning to begin its debt restructuring following the bondholder’s approval.
The latest approval was given after two meetings held on Tuesday and three on Monday, where more than 96% of the bondholders agreed to the proposed bailout. South Korea’s National Pension Service is currently DSME’s biggest bondholder and has already given its approval.
Daewoo Shipbuilding & Marine Engineering CEO Jung Sung-leep was quoted by Reuters as saying: “We will normalise the company as soon as possible through bone-grinding effort, so bondholders can come to think you made a good choice for yourselves, the company and the economy.”
The recent decrease in oil prices has led to DSME's financial predicament, and is also causing delays in payments for complex offshore facilities.
An estimated 50,000 jobs are currently said to be in danger because of the company's uncertain situation.
The recently approved debt-to-equity swap will enable Korea Development Bank (KDB) and Export-Import Bank of Korea (KEXIM) to provide up to KRW2.9tr ($2.54bn).
Bloomberg reported that the banks have agreed to convert 80% of loans given to DSME into shares, as well as extend maturity of the remaining commitments.
The fund is expected to be provided by late this month or early next month, pending court approval.
The new financing arrangement will also allow DSME to meet its requirement of nearly KRW2471bn ($413.6m) in operating funds by the end of this month.