1 trillion won pledged to DSME

Home > Business > Finance

print dictionary print

1 trillion won pledged to DSME

The nation’s financial regulator, the Financial Services Commission, pledged Thursday to establish a 1 trillion won ($916 million) fund to help save Daewoo Shipbuilding & Marine Engineering (DSME) within this month if the cash-strapped shipbuilder continues to suffer a liquidity crunch.

The proposed fund is the remaining part of the 4.2 trillion won that creditors including Korea Development Bank have promised to provide.

The plan was announced during a hearing on Thursday at the National Assembly to reprimand top decision makers involved in the decline of the shipping and shipbuilding industries, both currently saddled with astronomical debt and losses.

Commission Chairman Yim Jong-yong, Finance Minister Yoo Il-ho and leaders from the creditors and debt-ridden companies attended the hearing.

The funding decision comes as DSME is expected to face further headwinds this month, as 400 billion won worth of corporate bonds are set to mature at the end of this month.

Commission Chairman Yim added that creditors and state-run lenders such as Korea Development Bank and the Export?Import Bank of Korea will help the shipbuilder deliver Sonangol drillship No. 1 and 2, which are supposed to be delivered by Sept. 30.

At the hearing, Yim also updated lawmakers on the latest progress of restructuring plans in the shipbuilding and shipping industries.

Absent at the two-day hearing, through, were key figures including Choi Kyung-hwan, former finance minister; Ahn Chong-bum, the Blue House’s senior secretary for policy coordination; and Hong Ki-taek, former Korea Development Bank president.

The three men are accused of negligent monitoring of DSME. The shipbuilder is currently charged with accounting fraud.

Some lawmakers at the hearing accused the financial regulator of taking discriminating approaches toward shipping and shipbuilding companies, implying that it failed to make the best efforts to revive the indebted Hanjin Shipping.

Over a week after Hanjin Shipping filed for court receivership on Aug. 31, 220 cases of logistics disruptions have been reported by 219 companies to the Korea International Trade Association. The losses incurred are estimated to be around $100 million as of Thursday morning.

Hanjin-operated ships have either been seized or stuck at sea, failing to earn approval to enter or leave foreign ports. The situation has negatively affected ship leasers, cargo owners and freight forwarders.

“Over 1,000 freight forwarders who banked on Hanjin Shipping for cargo delivery and owners of that cargo are mostly small and midsize firms,” said Cha Mi-sung, vice chairman of the Korea International Freight Forwarders Association. “Survival of these companies is at stake.”

As concerns mounted, the Seoul Central District Court on Wednesday requested Hanjin Shipping creditors offer debtor-in-possession financing, a special form of financing for companies under restructuring wherein business operation is considered to bring more returns to creditors than the company closing down.

The court has said Hanjin’s 100 billion won in self-raised funds will not be enough, and the shipping company is likely to go bankrupt without the help of the government and creditors. According to the court, about 170 billion won will be needed to unload cargo from the ships trapped in ports around the world. However, the creditors essentially rejected the request.

The risky atmosphere has tied parent company Hanjin Group to cold feet as well. Although the group has already announced it would cough up 100 billion won to save its ailing shipping affiliate, the money has not yet been delivered to the court.

Forty billion won will come from Hanjin Group Chairman Cho Yang-ho’s own coffers, but the remaining 60 billion won has still yet to be fully confirmed by the group’s board of directors as opposing voices have grown. As Thursday’s board of directors meeting ended without a conclusion, the meeting will reopen today.

In the meantime, the other giant shipping line in the country, Hyundai Merchant Marine, will be forming a small alliance with three midsize shipping companies to send 15 ships to Southeast Asian countries to help fill in the void left by Hanjin Shipping and ease logistics disruptions.


BY PARK EUN-JEE, KIM JEE-HEE [park.eunjee@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)

What’s Popular Now