Korea Development Bank puts limit on support as DSME strike continues

A police helicopter flies over the Daewoo Shipbuildling & Marine Engineering shipyard in Geoje, South Gyeongsang, Friday, as the stirke by the company's subcontractors continues for the 51th day. [NEWS1]

As the strike by subcontractors of Daewoo Shipbuilding & Marine Engineering (DSME) continues, Korea Development Bank (KDB), the largest shareholder of DSME, announced that it will not provide additional support if losses expand. Bankruptcy is also being considered as the worst case scenario.

“The DSME strike may cause huge losses and a deterioration of liquidity,” said an official from the KDB on Friday. “As a major shareholder, we are reviewing all possible methods. In principle, additional support is not possible.”

The KDB is assuming that the best solution would be to end the strike and normalize business, but sees bankruptcy as an option to consider if the insolvency expands due to the prolonged strike.

If creditors cut off financial support for DSME, DSME will face serious liquidity difficulties and would likely need to file for rehabilitation.

DSME continues to suffer operating losses due to a slowdown in the industry and rising raw material prices, and it is expected that the company will face difficulties standing on its own without the support of creditors in a situation where there are no additional assets to sell due to restructuring.

According to the KDB, the total losses DSME will suffer due to the subcontractors’ strike is estimated to reach 816.5 billion won ($622.2 million) by the end of this month. This figure will increase to 1.359 trillion won next month if the strike continues.

BY LIM JEONG-WON [lim.jeongwon@joongang.co.kr]