STX to go into receivership after second salvage plan fails

Troubled shipbuilder STX Offshore & Shipbuilding will go into receivership as there is no sign that a further cash bail-out will salvage the firm, the company’s largest creditor Korea Development Bank announced on Wednesday.

The decision came after six months of injecting additional liquidity worth 453 billion won ($383.2 million) as part of the shipbuilder’s second restructuring plan, which involved layoffs of nearly 34 percent of the workforce and salary cuts on remaining employees. Back then, neither the government nor the creditors planned to send STX Offshore into receivership.

The creditors changed the stance mainly because of the lack of new orders since the end of last year and the continuing stagnant conditions in the global shipbuilding industry.

“After investigating the company’s business, we found that continuing the self-help plan won’t help the company anymore, and the company is also in a situation where going with court receivership is inevitable,” the midsize shipbuilder’s three major creditors - state-run KDB, Export-Import Bank of Korea and Nonghyup Bank - explained at a creditors’ meeting held at the KDB headquarters in Yeouido, southwestern Seoul, on Wednesday.

“External analysts say that the company is forecast to face bankruptcy at the end of May, as it is expected to be unable to pay for debt that reaches maturity this month due to a severe liquidity crunch,” KDB said.

Even if the creditor continues support, STX Offshore is about 700 billion to 1.2 trillion won short of cash to actually continue carrying out existing orders by next year, the statement said. In particular, the absence of new orders was forecast to worsen the company’s cash crunch and may eventually make the builder unable to finish its existing 52 orders, the KDB added.

The decision to put the company into receivership comes after three years of self-rescue plans.

STX Offshore carried out self-rescue plans and has been under creditors’ joint management since April 2013. Then, the company was the world’s fifth largest shipbuilder in terms of the number of orders. In return, creditors injected a total of 6 trillion won, including 4 trillion won from taxpayers’ money via KDB, Korea Eximbank and Korea Trade Insurance Corp.

In the wake of news that the shipbuilder will enter receivership, stock values of other STX affiliates tumbled.

STX, the main holding company of the shipbuilding arm’s performance bonds, saw its prices plunge by 19.85 percent to close at 1,555 won, and STX Heavy Industries, whose orders largely come from the shipbuilder affiliate, fell 13.7 percent to close at 2,960 won.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]