Creditor groups demand staff cutbacks in line with financial support
According to local media sources in South Korea, STX Offshore & Shipbuilding’s principal creditor bank, the Korea Development Bank (KDB), has presented to other creditor financial institutions a reconstruction plan centered around 453 billion won (Y46 billion) in support to help STX reconstruct itself. The plan calls for significantly scaling down STX’s operations and having it withdraw from large ship construction by converting its large ship construction yard into a block yard. It also calls for disposing of some construction slipways and reducing staff numbers.
Since 2013, creditor financial groups have been attempting to rebuild STX under the scheme of rehabilitation based on self-directed agreement (via autonomous-rescue) with creditors, a type of voluntary liquidation. However, STX’s financial issues have had become increasingly serious. As such, financial groups have elected not to provide 453 billion won of the initially promised 4.5 trillion won (Y460 billion), and have discussed the pros and cons of continuing to provide support, including the option of STX applying for corporate rehabilitation proceedings (formerly court-led management), which is equivalent to Japans’ Corporate Rehabilitation Law. KDB has revealed its plan to continuously move forward under the voluntary rehabilitation framework.
It will provide financial support as promised and lower its interest rate in an effort to promote STX’s voluntary reconstruction.
As for STX’s operations from here on, the shipyard will aim to convert itself to a small/midsize ship construction yard in an effort to avoid competition with other domestic yards. In terms of ship types, STX will specialize in MR-type product carriers (PC) and LNG fuel supply ships. STX Goseong Offshore & Shipbuilding, the group’s large ship construction yard focusing on mega-containerships and such, will be converted into a block manufacturing yard in 2017 upon finishing delivery of ships on its order book. Goseong will become a block manufacturer for major shipyards. STX’ newbuilding operations will be consolidated to its main shipyard in Jinhae, but three of its current five slipways will be disposed of.
With regard to employees, it has reduced its workforce by 860 people over the past three years, but plans to cut another 930 people from its current staff count of 2,700 from here on. Effective in January 2016, STX will also reduce all employee wages by 10%.
With these measures, STX expects to see its sales drop from current 2.2 trillion won (Y220 billion) to about 1.2 trillion won (Y120 billion).
Two banks opposing STX aid package
Woori Bank and KEB Hana Bank dissent not enough to derail $384m injection, report says.
Two creditors of STX Offshore & Shipbuilding reportedly have cold feet over an aid package but their concerns are unlikely to derail the process.
Yonhap reports that Woori Bank and KEB Hana Bank are unwilling to support a KRW 45bn ($384m) deal due to the distress seen in the global shipbuilding market.
Given the pair only have a 10% stake in the shipbuilder, the newswire says a cash injection will still be secured.
As part of the fresh funding, STX will refocus on tankers and small-sized LNG carriers, reduce pay and cut almost 1,000 staff, the report explains.
The shipyard has been controlled by its creditors for the past two years, with KDB extending loans totalling KRW 1.89 trillion, Yonhap says.
Its total debt with domestic banks stood at KRW 4.29 trillion at the end of the third quarter, the report said.
