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Gov’t will continue DSME turnaround

The government will continue with turnaround plans for Daewoo Shipbuilding & Marine Engineering (DSME), Financial Services Commission Chairman Yim Jong-ryong said Wednesday, despite an ongoing investigation into fraud that has led to an indictment of its former CEO.

“Any corruption or illegal activities should be clearly investigated by prosecutors and should be punished [accordingly],” Yim said during a press briefing. “Although there will be many difficulties independent of such [investigation] progress, we will continue to do our best with the creditors in pushing for DSME’s turnaround.”

Yim said the decision to continue with the indebted company’s turnaround despite an ongoing prosecutorial investigation was made considering the consequences it would have on the nation’s shipbuilding industry.

The chief financial policymaker added that resolving a 1 trillion won ($910 million) contract that DSME signed with Angola’s state-run oil company Sonangol is especially important in turning around the Korean shipbuilder.

DSME was hoping to secure 1 trillion won by delivering two offshore plants to Sonangol. One was supposed to be sent late last month while the other was promised for the end of this month. However, the Angolan oil company has pushed back the delivery date as it has become financially strapped due to falling oil prices.

Originally, the Norwegian Export Credit Guarantee and Korea Trade Insurance Corporation were to guarantee on loans that Sonangol sought from foreign banks to finance the two offshore plants. However, the Norwegian company decided to pull out after suffering massive losses in its investment on Petrobras, a Brazilian state-owned oil company, leaving Sonangol unable to pay for the new offshore plants.

DSME was hoping to resolve its liquidity crunch once the 1 trillion won payment was made. Without it, the Korean shipbuilder could face court receivership, even with its own turnaround plan that includes layoffs and selling off assets.

“If we leave it alone, a 1 trillion won project will be rotting at DSME’s dock,” Yim said.

On the indebted Hanjin Shipping, the Financial Services Commission chairman again stressed that the head of Hanjin Group, Cho Yang-ho, needs to contribute more of his own money to turn around the shipping line.

“If it can’t come up with the sufficient funds [needed] on its own, it will be dealt with according to principles [court receivership],” Yim said. “Overall, the liquidity situation of Hanjin Shipping is slightly worse than Hyundai Merchant Marine, but it needs to resolve the funds needed to turn around [the company] on its own.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]