Chairman 産銀 “Take special measures if the strike continues”
Interpreted as open to the possibility of bankruptcy
Raising the level of union pressure…may be an opportunity for restructuring
On the 22nd, Chairman Kang Seok-hoon of Korea Development Bank said, “Daewoo Shipbuilding & Marine Engineering’s subcontractor strike continues, and we cannot provide additional national tax support by one won.”
Chairman Kang said in a phone call with a reporter on the same day, “If the current situation of Daewoo Shipbuilding & Marine Engineering continues, it will be difficult to recover normal principal and interest.” He said, “We will take all special measures.” When asked what the special measures were, he replied, “I will try literally everything possible.” The possibility of Daewoo Shipbuilding & Marine Engineering’s bankruptcy is also interpreted as being open.
Many pointed out that Daewoo Shipbuilding & Marine Engineering (DSME) will face a liquidity crisis within the year as it faces financial difficulties. If the strike by the subcontractor union continues until the end of this month, the total damage to the company is estimated to be 816.5 billion won. If it continues until the end of next month, the total is estimated at 1.359 trillion won. This is due to the delay in ship building work as the subcontractor union occupied the first dock (ship building space) at the Okpo Shipyard in Aju-dong, Geoje, Gyeongsangnam-do, from the 22nd of last month.
Following an operating loss of 1.75 trillion won last year, the company posted an operating loss of 470.1 billion won in the first quarter of this year. As a result of the accumulated deficit, the debt-to-equity ratio at the end of March was 523.16%, a 144.12 percentage point increase from the end of the previous year. The consensus for this year’s operating profit (average estimates by securities companies) is also estimated at a loss of around 500 billion won. If the strike loss is also factored in, the operating loss will increase to 600 billion won to 900 billion won. As of the end of March, Daewoo Shipbuilding & Marine Engineering’s cash equivalents amounted to 1.44 trillion won. However, the amount of short-term borrowings that must be repaid within one year is 2.728 trillion won.
Without financial support such as additional loans from Korea Development Bank (55.7% stake), the largest shareholder, it is highly likely that a liquidity crisis will occur at the end of this year. The government, which has provided 12 trillion won in public funds so far, has declared that there will be no additional financial support if the strike continues. It is evaluated that the negotiations between the labor and management of subcontractors are also moving rapidly due to such pressures. There are also speculations that the negotiations will be concluded as early as this morning.
However, some are pointing out that the current situation should take a different approach to DSME than the previous government. This means that various restructuring measures should be pursued rather than continuing to provide financial support.
By Kim Ik-hwan, staff reporter [email protected]