SeongJoon Cho/Bloomberg News
South Korea’s National Pension Service has a decision to make — help the world’s biggest shipmaker survive, or let it die.
Creditors of Daewoo Shipbuilding & Marine Engineering Co. are due to meet to decide whether to convert some of the 1.55 trillion won ($1.4 billion) of bonds into equity to help the unprofitable company. Tipping the scale will be the decision of NPS, the biggest holder of debt that matures this month.
“If the National Pension Service doesn’t agree to the debt restructuring plan, then Daewoo Shipbuilding will no longer exist,” said Choi Gwang-shik, an analyst at HI Investment & Securities Co. in Seoul.
It’s the biggest test for South Korea’s lenders after Korea Development Bank, the shipbuilder’s majority shareholder, allowed Hanjin Shipping Co. to collapse last year after refusing to support its debt restructuring plan.
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Hanjin’s demise stranded about a hundred containerships around the world and roiled the global supply chain, putting some 11,000 jobs at risk. A Daewoo shutdown could be much worse, jeopardizing up to 50,000 jobs and $34 billion of vessel orders from companies including A.P. Moller-Maersk A/S and Statoil ASA.
“That’s why I think the restructuring plan will go through,” said Choi. “Chances of a recovery would be much greater if the plan is approved.”
The meetings may come down to a face-off between KDB, which owns 79% of the shipbuilder, and the state pension fund, which is already embroiled in its own scandal after the arrest of its chairman.
KDB and the Export-Import Bank of Korea said last month they would provide 2.9 trillion won in additional loans and swap about 1.6 trillion won of debt for equity if other creditors and bondholders agree to convert up to 80% of their debt and extend maturities for remaining loans by as much as five years.
| By Abhishek Vishnoi, Kyunghee Park and Jung Park Bloomberg News |
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