S. Korea's State Banks To Provide $2.4 Billion To Daewoo Shipbuilding

SEOUL, , (APP - UrduPoint / Pakistan Point News - 10th Nov, 2016 ) - South Korea's ailing Daewoo Shipbuilding and Marine Engineering will receive 2.8 trillion won (US$2.4 billion) in financial aid from two state-run banks, one of the lenders said Thursday.

The Korea Development Bank (KDB) -- the shipbuilder's biggest shareholder -- said in a statement that it will cancel 60 million of its Daewoo shares to reduce the company's share capital. It will then inject 1.8 trillion won into Daewoo Shipbuilding to convert some of the company's borrowings to equity.

The Export-Import Bank of Korea will buy one trillion won-worth of Daewoo-issued perpetual bonds to take part in "normalising the financial structure" of the shipbuilder, the statement said.

The latest capital injection is expected to slash Daewoo's debt ratio to about 900 percent from the current 7,000 percent and boost its capital to around 1.6 trillion won.

South Korean shipbuilders including Daewoo Shipbuilding and Marine, and STX have struggled with mounting losses as global demand slows and competition from Chinese rivals intensified. The government and creditor banks in recent months have urged intense restructuring efforts including mass job cuts, with Daewoo Shipbuilding planning to cut 5,500 jobs by 2018.

Plunging demand has also battered the global shipping industry, with South Korea's Hanjin filing for bankruptcy protection as it wallows under $5.37 billion in debts.