[Courtesy of Daewoo Shipbuilding]
South Korean taxpayers are required again to bear the burden of spending their money on keeping a troubled shipyard afloat under a fresh bailout led by state-controlled banks which have already injected a huge amount of liquidity at the expense of their red balance sheet.
Financial officials believe there is no other option to rescue Daewoo Shipbuilding & Marine Engineering with fresh loans, citing an aggravated liquidity crisis caused by dwindling orders and a prolonged business slump.
They are reluctant to acknowledge policy failures at a time when South Korea is going to select a new president in an election in early May following the departure of ex-president Park Geun-hye for her role in a corruption scandal.
"There is nothing concrete, but an announcement may come sooner or later," said an official at the state-run Korea Development Bank. Samjong KPMG, an accounting firm, found in a recent due diligence that the ailing shipyard is in need of around 3.5 trillion won (3.05 billion US dollars) to stay afloat as bonds worth of some 940 billion won mature this year and 550 billion next year.
Daewoo Shipbuilding, which is under creditor-led restructuring with two other major shipyards, has already sucked more than 11 trillion won in special loans since 2000.
Initially, experts suggested the shipyard should separate its defense section or merge with competitors to rehabilitate South Korea's embattled shipbuilding industry.
However, policymakers refused to do so, fearing a backlash from labor unions, politicians, provincial government officials and voters who have expressed concern about a setback in the regional economy.
Last year the Daewoo shipyard presented a self-rehabilitation program worth 5.3 trillion won to reduce its debt through asset sales and cuts in jobs and wages, based on the assumption that things would get better.
So far, the shipyard has raised just some 1.6 trillion won. Moreover, it received $1.55 billion in new orders, and the delivery of two drilling rigs worth one trillion won has been delayed.
The shipyard's corporate earnings released this week showed that its operating loss was down to 1.61 trillion won last year from 2.94 trillion won in 2015 while net loss narrowed to 2.71 trillion won from 3.3 trillion won a year ago with sales falling 15 percent on-year to 12.74 trillion won.
Former executives have been arrested for mismanagement, window dressing and accounting fraud to secure a continued flow of bank loans.
Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
