Daewoo Shipbuilding's lenders to inject US$2.4 billion in capital

SEOUL - Daewoo Shipbuilding & Marine Engineering will raise 2.8 trillion won (S$3.33 billion) by selling shares and bonds to Korea Development Bank and Export-Import Bank of Korea as part of efforts by the debt-laden company to bolster its financials.

Korea Development Bank, its biggest shareholder, will cancel most of its stock in Daewoo Shipbuilding to reduce the company's share capital, the state-owned lender said in an e-mailed statement Thursday.

It will then spend 1.8 trillion won to convert some of the shipbuilder's borrowings into equity to help pare debt. Export-Import Bank of Korea will buy 1 trillion won worth of perpetual bonds to be sold by Daewoo Shipbuilding, according to the statement.

The latest capital injection is part of a pledge made in October last year by the two lenders to provide 4.2 trillion won in loans and equity. The fundraising will cut Daewoo Shipbuilding's debt to equity to about 900 per cent and increase its share capital to about 1.6 trillion won. The company posted its widest net loss last year, its third annual deficit in a row, amid a dearth of orders for vessels and offshore drilling units.

Daewoo Shipbuilding shares were halted from trading in July, after one of its former chief financial officers was indicted for dressing up earnings over three years. They remain suspended pending a Korea Exchange committee's review. The shipyard will seek to resume share trading in March, Korea Development Bank Chairman Lee Dong-geol said this month.

The two banks have asked Daewoo Shipbuilding's labor union to accept the company's restructuring plan, which includes job cuts, in exchange for the funding, according to the statement Thursday.

Daewoo Shipbuilding plans to cut 5,500 jobs by 2018, of which more than half will be by the end of this year, to reduce expenses as new orders dry up. South Korea's shipbuilding industry may eliminate about 40,000 jobs in the second half of this year, after some 20,000 were cut in the first six months, the Korea Labor Institute estimated.