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, as they 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.

 According to the Korea Times, a group of creditors have programmes on offer, including including Korea Federation of Banks (KFB)’s Fast Track programme, that would mimic the industry-wide restructuring program used successfully in its construction sector. Under these scheme, 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. “We have about 120 members, who are all small shipbuilders across the country. They generated a combined 700 billion won last year. But there are many more small and medium-sized firms that are not members. It is hard to calculate the number of small shipbuilders at the moment,'' said a spokesman for the Korea Shipbuilding Industry Cooperative told the paper.