Daewoo Shipbuilding & Marine Engineering CEO Jung Sung-leep was quoted by Reuters as saying: "We will normalise the company as soon as possible through bone-grinding effort, so bondholders can come to think you made a good choice for yourselves, the company and the economy".
Creditors to Daewoo Shipbuilding & Marine Engineering Co. are due to meet this week to decide whether to convert some of the $1.4 billion of bonds into equity to help the unprofitable company.
The recent decrease in oil prices has led to DSME's financial predicament, and is also causing delays in payments for complex offshore facilities.
With this development, South Korea is closer to its goal of bailing out Daewoo Shipbuilding, with an estimated 50,000 jobs at risk and an economic hit of tens of billions of dollars if it should topple.
Its predicament follows the bankruptcy and liquidation of compatriot Hanjin Shipping Co Ltd after creditors declined further support past year for what was the world's seventh-largest container shipper.
It said the National Pension Service (NPS), which controls some 30 percent of the shipbuilder's corporate bonds, took into account that Daewoo Shipbuilding, KDB and the Export-Import Bank of Korea (Eximbank) all agreed to measures that would better ensure the repayment of corporate bonds that would be rescheduled.
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There bondholders will consider whether to agree to a 50 percent debt-to equity swap of roughly one-and-a-half trillion won, or 1.3 billion USA dollars, and a three-year grace period on the remaining debt under the condition that state banks will provide Daewoo with an additional 2.6 billion dollars.
"The chances of the bond-restructuring plan getting consent in other meetings is very high", said Park Tae-woo, a credit analyst at Samsung Securities. Korea Post told Reuters it chose to agree to the proposal after the NPS agreement was made public.
The NPS told KDB that it's willing to provide a three-month extension for the repayment on bonds that mature Friday, the pension fund said in an emailed statement Tuesday. Banks agreed to convert 80 per cent of loans to Daewoo Ship into shares and to extend maturity of the remainder, the Financial Services Commission said in a statement April 16.
The government plans to sell its stake in Daewoo after shrinking the shipbuilder over two years to a company generating revenue of 7 trillion won from about 13 trillion won last year, KDB Chairman Lee Dong-geol said at a news briefing on Sunday.
The bailout plus a 4.2 trillion won bailout starting in late 2015 amounts to South Korea's biggest state-backed rescue of a single company in over a decade, state bank officials said.