Korea Avoids Daewoo Shipwreck

Investors should be relieved. The world's biggest shipbuilder can now avert a bankruptcy whose costs were sure to be damaging to the entire South Korean economy and financial system.

The bankers of Daewoo Shipbuilding & Marine Engineering Co. have finally managed to persuade a major bondholder to accept their restructuring proposal. Korea's National Pension Service, which owns a quarter of the company's 1.55 trillion ($1.4 billion) of debt securities, was holding out for repayment of a bond that matures Friday. Korea Development Bank, the policy lender that owns 79 percent of Daewoo Shipbuilding, had been threatening to push the company into bankruptcy in an attempt to persuade NPS to fall into line. Bondholders would have received next to nothing in that event.