Financial restructuring to rescue small Korean shipyards

The South Korean Government and creditor banks are to carry out a pre-emptive restructuring for smaller Korean shipyards, which are at risk of folding in the current global financial crisis.

Unlike yards such as DSME, SHI and HHI, smaller shipbuilders are less likely to secure loans from financial institutions, and may be unable to build vessels. A group of creditors have programs on offer, including Korea Federation of Banks (KFB)’s Fast Track program that would mimic the industry-wide restructuring program used successfully in its construction sector. Under these schemes, shipbuilders will enter into an agreement with creditor banks if they want to have their debts rescheduled or receive new loans. But in return, companies will be required to sell assets and take a range of self-rescue measures in a bid to stay afloat. Banks will then screen each firm and provide necessary financing to viable firms but stop extending credit to nonviable ones. Korean shipbuilders are said to have delivered nearly 45% of new ships across the globe last year, earning about 45 trillion won ($31bn). However, data is unavailable for the contribution of small and medium sized shipyards to this figure.
Read More