STX Offshore Files for Court’s Aid Amid Korean Industry Woesby
Company files for protection in Seoul central district court
Court to take action after reviewing company proposal
South Korean shipbuilder STX Offshore & Shipbuilding Co. filed for court protection, the latest trouble to surface in a country where the government is trying to help an industry mired in losses and slump in orders for vessels.
STX Offshore submitted the application to the Seoul Central District Court on May 27, the Changwon, South Korea-based company said in a regulatory filing Monday. The court will decide whether to accept the request after reviewing the proposal, it said. Shares of the company were de-listed from the stock market in 2014 after the company’s creditors converted their loans into equity.
South Korea’s shipbuilding industry, the world’s second-biggest, has been mired in losses as the industry’s largest players suffer from a lack of orders amid a slump in global crude oil prices. The troubles at South Korean builders also spread to their rivals in Japan, China and Singapore, as several shipbuilders and offshore-platform makers warn of losses and plan to restructure.
South Korea vowed last month to revamp its shipping and shipbuilding industries. Contracts for new vessels have shrunk, while shipping lines battling losses or smaller profits are paring their workforce and considering consolidation after years of overcapacity depressed freight rates.
Earlier this month, the government said it will re-evaluate STX Offshore and other shipyards to find out which ones may not be worth providing more funds.
The evaluation showed that STX Offshore will have severe cash problems and could default on debt at the end of May, unless drastic measures are taken, Korea Development Bank said last week. The state-owned lender is the shipbuilder’s main creditor.
“Providing more loans will not only increase the creditors’ exposure but it’s uncertain whether the company will be able to repay the loans,” KDB said in the May 25 statement.
STX Offshore had been restructuring its debt with its creditors since April 2013 and received 850 billion won ($713 million) in loans and debt-for-equity swap to revive the company.
The company’s troubles came in 2013 came after setting up a shipbuilding and offshore complex in Dalian, northeastern China at a time when Asia’s biggest economy slowed and the European financial crisis added to a plunge in cargo rates. That led to the dismantling of the STX Group and many of the units went into debt restructuring with creditors.