Shipbuilder’s restructuring plan gets approval from creditors

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Shipbuilder’s restructuring plan gets approval from creditors

Creditors have accepted STX Group’s flagship STX Offshore & Shipbuilding’s voluntary corporate restructuring agreement, paving the way for the world’s fourth-largest shipbuilder to improve finances sapped by a severe credit crunch.

Korea Development Bank, the main creditor, confirmed the approval yesterday after accepting written agreements Monday from seven creditors, including Export-Import Bank of Korea, NH Nonghyup Bank, Woori Bank and Shinhan Bank.

The approval has allowed creditors to inject emergency funds to help STX Offshore & Shipbuilding repay 104.3 billion won ($91.5 million) in debt that matured yesterday.

According to Korea Development Bank, creditors will meet again this week to discuss a due diligence process. They will set up a formal consultation body to determine the details of a restructuring plan and decide the total amount of emergency funds necessary to aid the financially distressed company after conducting due diligence for two to three months.

“Given that STX Offshore & Shipbuilding has a backlog of orders worth $15.9 billion and there are signs the shipbuilding industry will improve, creditors unanimously agreed to accept the company’s voluntary restructuring plan,” said a creditor. “There was a consensus that we should stop the company from collapsing because of a temporary financial difficulty.”

A voluntary restructuring plan is not legally binding, unlike court-led debt restructuring. It is regarded in business circles as a low-degree workout program because creditors will have supervision authority.

Market observers say it is inevitable that the nation’s 14th-largest conglomerate will restructure and cut its fat by selling off some affiliates.

STX Offshore & Shipbuilding suffered a net loss of 782 billion won last year and posted an operating loss of 403.4 billion won.

The company last week sought a voluntary corporate restructuring agreement, not long after its mother company, STX Group, failed to secure financing to repay maturing debts when its second-largest affiliate, STX Pan Ocean, failed to attract a bid from any investor interested in buying its 35.9 percent stake in late March.

Korea Development Bank said it is looking into acquiring STX Pan Ocean at the request of STX Group. It said its task force team will review the matter as preliminary due diligence for a month. If it decides to take over the company, it would conduct due diligence for three months and be expected to sign a contract as early as July.

According to market observers, STX Group has borrowed a total of 12 trillion won from banks and about 1 trillion won of that debt will mature this year.

STX Group suffered a liquidity crunch after orders for new ships plunged significantly due to the sector’s prolonged downturn after the 2008 financial crisis. It did manage to secure about 1.13 trillion won by selling off its affiliates’ stakes, including STX OSV and STX Energy last year.

Meanwhile, STX Offshore & Shipbuilding said Monday it won a 191.6 billion contract to build four fuel-efficient 113,000-deadweight-ton long range 2 product tankers to Teekay Tankers of Canada. The deal also includes fixed-price options for as many as 12 additional tankers that can be exercised over the next 18 months.

If Teekay Tankers orders the 12 additional ships, the total amount of deal would be 800 billion won, the shipbuilder said.

“We’re certain the shipbuilding industry is at a recovery pace,” said an executive at STX Offshore & Shipbuilding. “Approval of the voluntary restructuring plan will make it easier to win more orders overseas.”

By Kim Mi-ju []
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