Daewoo shipyard unswayed by defeat in court battle with European contractor

By Lim Chang-won Posted : March 22, 2018, 09:55 Updated : March 22, 2018, 09:55

[Courtesy of Daewoo Shipbuilding]



SEOUL -- Daewoo Shipbuilding & Marine Engineering, a debt-stricken South Korean shipyard controlled by creditors, feels unswayed by a defeat in a legal battle to recoup losses from a troubled deal with Songa Offshore, a European offshore drilling contractor, officials said.

In 2011, Daewoo Shipbuilding received an order from Songa Offshore to build rigs, but due to delays in construction and changes in design, the shipyard saw an unexpected increase in costs and launched arbitration proceedings seeking damages of 373 million US dollars.

In July last year, the arbitration tribunal in London ruled in favor of Songa Offshore and a British high court rejected Daewoo Shipbuilding's right to appeal.

Daewoo Shipbuilding, which is still under a rehabilitation program by creditors, insisted that losses have already been reflected in 2015 and 2016. "There will be no particular impact on our company" as a result of the British court's decision, one official said on condition of anonymity.

The Songa deal has been a source of controversy over Daewoo Shipbuilding's huge debt. Former executives have been arrested for mismanagement and window dressing to secure a continued flow of bank loans.

With a massive injection of state money, the ailing shipyard has been kept afloat in return for a sweeping rehabilitation program to ease its liquidity crisis caused by dwindling orders and a prolonged business slump.

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.

This year, South Korean shipyards predict a slight recovery in their business, citing growing demands for gas-fuelled ships.
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