NPS support gives DSME turnaround plan a chance

A bailout for cash-strapped Daewoo Shipbuilding & Marine Engineering finally got an official nod from the National Pension Service early Monday, which should pull the sinking shipbuilder above the waterline.

At midnight Monday, just a few hours before a bondholders’ meeting scheduled for 10 a.m., the NPS finally agreed on a turnaround plan proposed by the Financial Services Commission and the Korea Development Bank in late March. The NPS is DSME’s largest bondholder.

The last-minute decision by the state-run pension fund, which holds nearly 30 percent of DSME’s bonds, followed prolonged deliberations and negotiations with the financial authority and the company’s main creditor banks, the KDB and the Export-Import Bank of Korea. A final pitch to get the NPS to sign onto the rescue plan came over the weekend with the FSC and the KDB offering to set up an escrow account of 100 billion won ($88 million), the minimum amount bondholders would receive if DSME went under, as collateral in case the turnaround plan fails.

“Approving the plan seemed to be the most favorable option,” said the NPS in a press release.

As expected, the NPS’ approval led other bondholders to follow suit. The main institutional bondholders other than the NPS - Korea Post and Teachers’ Pension, who hold 160 billion won and 100 billion won worth of bonds respectively - reportedly gave their green light.

The first bondholders’ meeting of the day started at 10 a.m. Monday at DSME’s headquarters in Jung District, central Seoul, to decide on the rescheduling of 300 billion won set to mature in July. In order for the turnaround measure to pass, two-thirds of the bondholders present at the meetings must agree on the plan, and over one-third of all bond-holding individuals and institutions must attend one of the meetings.

Nearly 100 percent of the bondholders at the first meeting, which represented 240 billion won or 80.12 percent of the entire amount due in July, agreed on a debt-to-equity swap plan. Major institutions at the meeting included the Korea Post, holding 40 billion won of those bonds, and the Teachers’ Pension, holding 50 billion won.

“We still have more meetings to go but with major institutional investors such as the NPS on board, we just hope we are given another chance,” said a DSME insider.

The second meeting began at 2 p.m. to discuss about bonds scheduled to mature in November. Korea Post was the largest bondholder at that meeting, holding 69 billion won. Out of 200 billion won, owners of corporate bonds worth 178 billion won, or 89.11 percent, approved the rescheduling.

The final hurdle of the day came during a last meeting at 5 p.m. with 440 billion won due this Friday on the table. With the NPS and Korea Post collectively holding nearly half of the amount at 210 billion won, the odds were in DSME’s favor. The plan was approved, but the margin was not available by press time.

Should the rescue plan get a final go-ahead after today’s meetings, DSME will receive a fresh injection of 2.9 trillion won and the repayment of debt worth 890 billion won will be delayed. This would slash the company’s debt ratio from about 2,700 percent to 300 percent or below.

For this year so far, DSME has orders worth $1.4 billion including a letter of intent to construct a LNG floating storage and regasification unit for a U.S. company.

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