STX creditors start bailing

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STX creditors start bailing

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Creditors gave last-minute approval to a voluntary corporate restructuring agreement filed by debt-ridden STX Group, paving the way for the shipbuilder to avoid default and get back to business, market observers said yesterday.

Woori Bank, NH Nonghyup Bank, Shinhan Bank and Korea Finance Corporation agreed to send their written consent to the main creditor, Korea Development Bank, by yesterday’s deadline, according to industry insiders.

Creditors agreed to inject an emergency fund of 300 billion won ($270 million), of which 200 billion won will be used by STX Group to repay a corporate bond that matured yesterday. The remaining 100 billion won will be used as an emergency management fund.

Korea Development Bank first will grant the 300 billion won to the shipbuilder and later square up the amount with other creditors based on their share of the conglomerate’s corporate bond.

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 has suffered a liquidity crunch as orders for new ships plunged significantly since the 2008 financial crisis.

Yesterday’s decision came several days after STX Group, STX Heavy Industries and STX Engine filed a voluntary debt restructuring plan May 3.

Korea Development Bank originally asked creditors to turn in their written consent for a voluntary restructuring plan by May 10, but none of them complied.

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Woori Bank was the first to turn in written consent Monday evening, and Korea Finance Corporation followed suit yesterday morning.

“We thought that reviving STX Group is the top priority at this point,” said an employee at Woori Bank.

NH Nonghyup Bank and Shinhan Bank sent the consent yesterday afternoon after conducting a separate credit evaluation meeting on STX Group. Some insiders there questioned STX Group’s ability to recover as its main business is importing crude oil and coal, unlike STX Heavy Industries and STX Engine that focus on shipbuilding.

Authorities including the Financial Supervisory Service have raised concerns that the collapse of the nation’s 14th-largest chaebol would take a heavy toll on the Korean economy.

“STX Group’s 80 billion won corporate bond is due July 20 and a 200 billion won corporate bond is set to mature on Dec. 3,” said an employee at a creditor bank familiar with the issue. “We will request that Korea Development Bank come up with countermeasures to deal with maturing bonds as repaying maturing corporate bonds on behalf of STX Group goes against market principles.”

The deadline for STX Heavy Industries and STX Engine’s voluntary restructuring agreement is due tomorrow.

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

Meanwhile, yesterday’s news boosted the stock price of STX Group and its affiliates’ shares. STX Group closed up 2.73 percent to 2,820 won. STX Offshore & Shipbuilding, the group’s flagship affiliate, gained 1.96 percent to close at 3,910 won. STX Engine also gained 1.6 percent.


By Kim Mi-ju [mijukim@joongang.co.kr]

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