FSS asks banks to support DSME

Korea’s top financial regulator on Friday called for heads of banks to play a “responsible role” in normalizing Daewoo Shipbuilding and Marine Engineering, as a bailout plan for the troubled shipbuilder was cleared by its stakeholders.

Zhin Woong-seob, governor of the Financial Supervisory Service, asked banks not to aggressively collect debt from shipbuilders and their subcontractors, given their financial strains amid a downturn in the shipbuilding industry. It is the first time the financial regulator has asked for cooperation with banks since June last year, when the government announced a set of plans to restructure the nation’s top three shipbuilders.

The Financial Supervisory Service said in a statement that Zhin asked the heads of 15 banks to play a “responsible role” and pay attention to business conditions at DSME as shareholders and creditors move to help normalize operations.

After weeks of intense negotiations between creditors and bondholders, the two sides agreed this week on a painful debt-equity swap to keep DSME afloat. The shipbuilder filed for court approval on Thursday for its debt rescheduling, paving the way for the company to receive a fresh cash injection from creditors.

With the court approval, expected to be due in two weeks, the world’s largest shipbuilder by order backlog will be able to gain access to new financing worth 2.9 trillion won ($2.54 billion) from creditors led by the state-run Korea Development Bank.

The lifeline, the second of its kind, will help tide over the shipbuilder suffering from severe liquidity problems over heavy losses in its offshore projects. The injection is expected to be made in early May. YONHAP