Hyundai Heavy gains approval for an overhaul

Hyundai Heavy Industries (HHI) said on Wednesday that it obtained approval from its main creditor, KEB Hana Bank, for a 3.5 trillion won ($2.9 billion) self-rescue plan.

The world’s top shipbuilder has become the first among three players in the nation’s troubled shipbuilding and shipping industries to obtain approval for self-made plans to put its management back to normalcy.

The shipbuilder declined to disclose details of the restructuring plans, citing a confidentiality agreement with creditors. The plans, submitted on May 12, include selling investment securities and real estate as well as cutting its workforce.

Through the plans, HHI aims to cut its debt-to-equity ratio to under 100 percent by 2018. Currently, its debt ratio stands at 134 percent. The company is sitting on a debt of 8.5 trillion won, which it pledged to cut to between 6 million won and 7 trillion won.

“We came to a conclusion that the self-rescue plan submitted by HHI was meaningful,” a spokesman with Hana Financial Group, which controls KEB Hana Bank, was quoted as saying by Yonhap News Agency.

“We may ask for a revision to its plan after the due diligence process ends, but considering its contracts from overseas and how the domestic economy is going, we notified them to roll out its plan as scheduled.”

Under the approved measure, the company plans to sell bonds that were meant for investment. It will also discard assets like land property in front of Hyundai Department Store and a dormitory building attached to company-owned dockyards, both of which are in Ulsan, HHI’s headquarters.

With HHI receiving a positive sign to improve its financial situation, industry insiders are eyeing whether local competitors Daewoo Shipbuilding & Marine Engineering (DSME) and Samsung Heavy Industries (SHI) can get their much-needed rescue plans as well.

DSME, once the world’s No. 2 shipbuilder, has submitted a restructuring plan worth 1.85 trillion won to its main creditors, including the state-run Korea Development Bank (KDB) in October.

Based on the results of a so-called stress test, which is designed to analyze the company’s capacity to deal with financial crisis, the shipbuilder will reportedly submit its renewed rescue plan worth 2 trillion won today.

In the meantime, SHI is awaiting approval of its plan worth 1.5 trillion won that was submitted to KDB on May 17.

DSME and SHI already cut 30 percent of their executive teams last year.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]