By Ko Jae-man and Kim Hyo-jin
The South Korean government decided to keep two financially-troubled mid-sized shipbuilders Sungdong Shipbuilding & Marine Engineering Co. and STX Offshore & Shipbuilding Co. afloat by downsizing them.
The restructuring outline for the money-losing shipyards would be finalized after a cabinet meeting presided by deputy prime minister and finance minister Kim Dong-yeon on Thursday.
Sungdong, whose liquidation value more than triples its going-concern value, will head to bankruptcy court without additional creditors’ relief. But the government will recommend the court to keep the shipyards open for repair and sub-assembly or block-level building tasks.
Nearly 4 trillion won ($3.74 billion) worth of bank funds - 2.5 trillion won in loans and 1.5 trillion won debt swap into equity - have gone into Sungdong ever since it entered voluntary creditors’ management in 2010. State lender Export-Import Bank of Korea extended 2.1 trillion won in loans and converted 1 trillion won worth into equity.
STX will be asked to scale down its workforce by 40 percent and keep to small-sized tankers and gas carriers.
STX has 16 vessel orders in its backlog, which will keep its dockyards busy until the third quarter of next year. If it can keep up its order flow, creditors will consider additional funding.