South Korea's two main policy lenders announced plans Thursday to provide Daewoo Shipbuilding & Marine Engineering Co. (DSME) with financial support worth a total of 3.2 trillion won (US$2.7 billion), urging the firm's labor union to refrain from taking collective actions and support its restructuring efforts.
The Korea Development Bank (KDB), a main creditor of the troubled shipyard, said it will convert 1.8 trillion won of debt into equity. The Export-Import Bank of Korea (Eximbank) also plans to issue perpetual bonds worth 1 trillion won to help Daewoo expand its capital.
The KDB has already offered 400 billion won for Daewoo in the form of a paid-in capital increase.
With the 3.2-trillion won package, Daewoo's capital will increase to around 1.6 trillion won, with its debt ratio dropping to some 900 percent from 7,000 percent.
The banks, however, attached some preconditions.
They demand Daewoo's labor union officially agree to avoid walkouts and other collective actions and also join in the company's implementation of self-rescue measures.
"Given the grim management circumstances facing the DSME, the support by the KDB and Eximbank is no more than one of a host of requirements to attain for the continued push for the normalization (of the firm)," the KDB said in a statement.
"Concerted efforts by labor and management and pain sharing are indispensable to ride out the crisis."
The banks will rethink a "fundamental method" to handle the issue unless the two sides submit a written deal on their joint efforts, added the KDB.
But the new leadership of Daewoo's labor union maintains a negative stance on such an agreement with the management.
A board of directors at the company is scheduled to hold a meeting late next week to review the proposed rescue package.
