Regulator vows action on DSME

The Financial Services Commission, the country’s financial regulator, said Wednesday that it will address the aggravating liquidity crunch at debt-ridden Daewoo Shipbuilding and Marine Engineering with a new state-backed bailout plan.

Multiple media outlets reported that the government would inject another 2 trillion won ($1.7 billion) on top of a previous 4.2 trillion won fund, but the Financial Services Commission said it had yet to hammer out the details.

“We have not yet decided whether we will offer additional funding, nor have we settled on an amount,” a source at the commission’s financial and corporate restructuring policy bureau said. “But it is true that we intend to come up with ways to ease the liquidity issue.”

The move comes as DSME’s hundreds of billions of won in corporate bonds are about to reach their maturity this year. The most impending deadline is April, when 440 billion won are due to mature, followed by another 300 billion won in July and 200 billion won in November.

DSME must pay back at least 1.6 trillion won in debt, including corporate bonds and promissory notes, by the end of 2018.

Lee Dong-geol, chairman of the state-run Korea Development Bank, said the first priority is to secure the payment and stressed that no more taxpayer money should be put into DSME’s restructuring efforts. Korea Development Bank is the main creditor of DSME.

“We’ll look into different ways,” he said, “but the basic stance is that under no circumstance should more taxpayer money be spent on DSME.”

Observers see Lee’s comments as directed at commercial banks that are also creditors. Korea Development Bank and the Financial Services Commission hoped that the banks would shoulder the burden of bailing out DSME, but so far, most of the funding has primarily come from the state-run Korea Development Bank and Export-Import Bank of Korea.

The shipbuilder has already spent a majority of the 4.2 trillion won in state support, but it’s still showing little sign of recovery. The funds were decided on the assumption that the troubled shipbuilder would achieve yearly orders of 11 billion won, but DSME’s actual performance in 2016 stood at 13.6 percent of the estimation, causing further capital shortage.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]