DSME secures order as creditors discuss bailout

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DSME secures order as creditors discuss bailout

Daewoo Shipbuilding and Marine Engineering, a Korean shipbuilder on the verge of possible liquidation, has struck a deal with Hyundai Merchant Marine, a Korean shipping company, to construct as many as 10 very large crude carriers, the largest type of oil tankers in the industry, the company said Sunday.

The contract adds some hope before a shareholders meeting scheduled for April 17 and April 18, when creditors of DSME will decide the indebted shipbuilder’s fate.

DSME chief executive Jung Sung-leep and HMM CEO Yoo Chang-keun inked a letter of intent on Friday at the shipbuilder’s headquarters in Da-dong, central Seoul, to build five crude carriers worth 450 billion won ($396 million) with the option to construct five more. The contract will be finalized in July and altogether, the beleaguered shipbuilder could reel in as much as 900 billion won.

The contract with HMM comes just a few days after DSME announced Tuesday that it had received a $250 million order from Maran Tankers Management, the oil delivery unit of Greece’s Angelicoussis Shipping Group, for three very large crude carriers to be delivered by 2018.

Adding the HMM order as well as one from Excelerate Energy of the United States for a liquefied natural gas floating storage and regasification unit, the total size of orders that DSME has clinched this year amounts to 13 ships or $1.4 billion.

The latest deals bode well for the cash-strapped shipbuilder as it guarantees future revenue sources for the company and allows it to pay off debt it owes. “Such new orders will help DSME as it tries to overcome the pending liquidity crisis,” the company said.

To stay afloat without undergoing court receivership, major creditors including the National Pension Service must approve a bailout plan proposed by Korea Development Bank and Financial Services Commission that would turn around 50 percent of the debt they own into equity.

The state-owned pension fund, the largest shareholder with nearly a third of DSME’s corporate bonds, deferred its decision for a second time on Thursday. It reportedly gave an ultimatum to Korea Development Bank on Friday and requested revisions of the plan. The bank must notify the pension fund of its decision by today.

To persuade the National Pension Service, Jeong Yong-seok, vice governor of restructuring at Korea Development Bank, reportedly met with officials from the pension fund on Sunday. Following the closed meeting, the bank’s chairman, Lee Dong-geol, along with Choi Jong-ku, CEO of another major creditor the Export-Import Bank of Korea, and Jung of DSME will sit down with 32 institutional investors including the National Pension Service and Korea Post to discuss the shipbuilder’s turnaround plans.


BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]

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