Korea’s three major shipbuilders face a 2.2 trillion won ($1.9 billion) wall of debt due next year, with second-ranked Daewoo Shipbuilding & Marine Engineering deepest in debt, data showed Monday.
DSME has 980 billion won of debt maturing this year and next, including 40 billion won in commercial paper due in September. That is nearly 70 percent of its total liability of 1.3 trillion won.
(Yonhap)
Cash flow has been tight at DSME after it logged a record operating loss of 5.5 trillion won in 2015, but the looming debt payments mean that the situation will likely get even worse going forward, experts said.
“Some bright spots do exist in the company’s business outlook, but investors won’t be convinced unless they see an injection of capital,” said Choi Gwang-shik, an analyst at Hi Investment & Securities in Seoul. Late last year, state-run Korea Development Bank, which owns slightly less than 50 percent of the shipbuilder, has provided DSME with 4.2 trillion won capital support, together with its creditor banks.
One of the bright spots, Choi said, is that the company has order backlog worth 25 trillion won, which is markedly higher than that of its competitors.
However, what is overwhelming is DSME’s meagre holding of cash and cash equivalent, which stood at 138 billion won at the end of December, according to its auditory filing. The firm’s credit rating has fallen to a junk-bond level by Korea Investors’ Service, a Korean affiliate of Moody’s.
Share in DSME closed at 4,825 won ($4.14) on Monday, 5.39 percent lower than the previous close, against the benchmark KOSPI’s 0.45 percent decline.
Hyundai Heavy, the largest among the Korean shipbuilding trio, has 680 billion won in debt due next year, while third-ranked Samsung Heavy’s debt obligations next year is close to 600 billion won.
“The global slump has virtually stopped new shipbuilding orders for the Korean trio. Their troubles may deepen in the coming years,” Lee Mi-sun of Hana Financial Investment said.
By Lee Sun-young (milaya@heraldcorp.com)