State banks, bondholders still sparring over Daewoo Shipbuilding’s rescue package

SEOUL-- The Korea Development Bank (KDB) and Export-Import Bank of Korea (EXIM Bank) -- the two main creditors of troubled Daewoo Shipbuilding and Marine Engineering Co. -- on Wednesday rejected calls from a key bondholder to allow a three-month extension for the repayment of bonds that mature this month, and allow it to conduct due diligence on the world's largest shipyard by order backlog.

Earlier, the state-run National Pension Services (NPS) demanded that under its proposal, the NPS and other corporate bondholders be allowed to review the shipyard's restructuring program.

Daewoo Shipbuilding should pay off 440 billion won in corporate debts that mature next week, some 200 billion won of which are held by the NPS.

"The NPS' view is totally wrong from the start," said Choi Jong-ku, the head of the EXIM Bank. "Daewoo Shipbuilding has been already in technical default, and we cannot accept the NPS' demand."

The banker said it is inevitable for Daewoo Shipbuilding to be put under a new form of court receivership, called a prepackaged plan, unless bondholders of the shipbuilder agree on a debt-for-equity swap plan.

The National Pension Service (NPS), which holds about 30 percent of bonds sold by Daewoo Shipbuilding, earlier even demanded that KDB cover the debts of Daewoo Shipbuilding maturing this month, although it withdrew it later.

Late last month, KDB and another state-run creditor bank announced a fresh rescue package worth 6.7 trillion won (US$5.8 billion) for Daewoo Shipbuilding, but only if all stakeholders agree to a debt-for-equity swap plan.

The huge assistance measures represent the second round of bailouts for the shipbuilder that has been suffering from 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 to the repayment of the remaining debt.

The NPS held a meeting earlier this week over whether to accept the debt-for-equity swap plan, but it made no decision, citing "doubts" over Daewoo Shipbuilding's financial situation.

Of 1.35 trillion won worth of corporate bonds sold by Daewoo Shipbuilding, the NPS holds 388.7 billion won.

Policymakers here are increasingly nervous about the possibility of Daewoo Shipbuilding facing the prepackaged plan, which will undermine 50,000 jobs and trigger massive cancellation of ships under construction.

Next week, bondholders of Daewoo Shipbuilding will gather on April 17-18. If they don't accept the debt rescheduling, the shipbuilder will be placed under the prepackaged plan.

Source: Yonhap News Agency

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