South Korea’s cash-strapped Daewoo Shipbuilding and Marine Engineering has moved one step closer to getting a fresh 2.9 trillion won ($2.5 billion) loan to tide over its financial woes, as its bondholders approved a debt-to-equity swap plan at their first three meetings Monday.

At the separate meetings, bondholders who hold a combined 940 billion won of corporate bonds of DSME that mature by November this year approved the debt restructuring measures, initially suggested by the shipbuilder’s major creditors Korea Development Bank and the Export-Import Bank of Korea last month.

The measures, also supported by the government, would have creditors provide 2.9 trillion won in fresh loans to DSME and swap about 1.6 trillion won of debt for equity, on the condition that bondholders agree to convert half of their 1.3 trillion won debt for equity and extend maturities for the other half of the loans by three years.

“An eighty percent of the bondholders holding 300 billion won in bonds (maturing in July) participated in the bondholders’ first meeting and 99.9 percent of them voted for the debt restructuring measures,” the shipbuilder said in an emailed statement. At the second meeting of bondholders with 20 billion won of bonds maturing in November, and at the third meeting of those with 440 billion won of bonds maturing in April, bondholders also accepted the plan, the company said.

For DSME to get the 2.9 trillion won injection and reschedule debts, bondholders should agree on the measures at all of the five bondholders’ meetings that will end Tuesday afternoon.

The Monday agreement of the bondholders was apparently boosted by the National Pension Service’s last-minute agreement on the debt restructuring measures.

The NPS, the largest bondholder of DSME with about 390 billion won in bonds or 29 percent of all bondholders’ debt, said its acceptance of the main creditors’ plan would be advantageous to improve the fund’s returns and benefit the subscribers of the fund.

“We finally decided to accept the debt restructuring plan because it would be better to improve the fund’s returns,” the NPS said in a statement at around midnight Sunday after marathon negotiations with the KDB and Exim Bank.

Following suit early in the morning, the second-largest bondholder Korea Post with 180 billion won in bonds also said it agreed on the debt restructuring plan as well.

During the negotiations with the NPS, the KDB and Exim Bank made a last-minute concession to the NPS that the banks would put the principal of maturing bonds in an escrow account a month ahead of maturity and have the shipbuilder set aside 100 billion won in another account for bondholders in case of the liquidation.

Industry watchers said it was likely that the rest of the bondholders could follow the NPS to agree on the plan at the remaining two meetings to help DSME stay afloat.

Despite the government’s repeated cash provisions for years, the shipbuilder has been unprofitable overthe past four years amid a global oversupply and a slowdown in orders. Its accumulated operating losses amounted to about 6 trillion won for the past four years.

However, the shipbuilder’s CEO Jung Sung-leep told bondholders Monday that the company seems to have made a turnaround in the first quarter this year.

If bondholders do not reach an agreement on the plan at least once in the two remaining meetings, the shipbuilder will be put under a “pre-packaged plan,” a mixture of court receivership and a debt workout, which is deemed as the worst scenario for DSME.

The pre-packaged plan is likely to put 50,000 workers at the shipbuilder at risk and incur tens of billions of dollars in losses, the financial authorities have said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)