STX Pan Ocean Co., South Korea’s biggest commodities carrier, fell to a record low in Seoul trading after a court accepted its filing to seek protection.
Pan Ocean fell by its daily 15 percent limit to close at 2,185 won, the lowest price since it debuted on the Korea Exchange September 2007. Trading in the shares had been halted since June 6, and the company filed for court receivership the next day. Shares in Singapore slumped 46 percent.
The court acceptance means investors will see their shareholding written down and creditors will swap debt for equity as part of any restructuring plan, said Cho Byoung Hee, an analyst at Kiwoom Securities Co. in Seoul. The shipping company sought court receivership after Korea Development Bank, the main creditor and Pan Ocean’s second-biggest shareholder, decided against buying the company from debt-ridden STX Group.
“This is only the start of more pain for Pan Ocean and other units of STX Group,” said Cho. “It’s important that court filing and other measures that will follow are done quickly to minimize the impact on Pan Ocean’s business.”
STX Group -- with businesses ranging from shipbuilding to components that go into vessels -- is the largest shareholder of Seoul-based Pan Ocean. The parent has been trying to raise 2.5 trillion won ($2.2 billion) by selling stakes in units as a slump in bulk shipping rates caused ship orders to tumble.
Korea Development Bank, which was considering buying Pan Ocean through its private-equity arm, decided against using that route after evaluating the shipping company, the lender’s Executive Director Ryu Heui Kyoung said on June 7.
Pan Ocean currently has about 300 vessels, including 97 it owns. About a third of those ships are operated under long-term contracts with companies such as Brazil’s Vale SA and South Korea’s Posco.
The Baltic Dry Index, a global measure of commodity-shipping rates, has fallen more than 90 percent from its peak five years ago because of excess capacity, according to the Baltic Exchange.
Since the credit crisis, orders to build new ships have plunged. Contracts for new vessels halved to $84.7 billion last year, compared with $174.7 billion in 2008, according to Clarkson Plc, the world’s biggest shipbroker.
Pan Ocean had 4.5 trillion won of loans, ship financing and other debt, according to Korea Development Bank. It had cash and near cash of 173 billion won at the end of March, compared with 287.8 billion won at the end of last year and 501 billion won in 2011, according to its financial statements.
STX Group was founded in 2001 by Kang Duk Soo, who used life savings from a 27-year career at another South Korean conglomerate, or chaebol, Ssangyong Group, to build a business group spanning the manufacture of cruise ships, wind turbines and apartment blocks.
The group was built partly by buying financially struggling companies. In 2001, Kang bought Daedong Shipbuilding Co., then-South Korea’s eighth-largest shipbuilder, which had just exited court protection, and renamed it STX Offshore. Kang bought Pan Ocean three years later while it was in bankruptcy protection.
STX Offshore & Shipbuilding Co., a unit of STX Group and the third-biggest shareholder of Pan Ocean, and two other group companies earlier this year voluntarily sought debt rescheduling with their creditors.
STX Group has said it will focus on its shipbuilding business. Korea Development Bank will put together a restructuring plan for STX Offshore this month based on a due diligence of the company, Ryu said June 7.
STX Offshore jumped 11 percent as creditors may help revive the company after a due diligence found it to be viable, Korea Economic Daily said citing unidentified officials in the financial industry.