Korea Development Bank limits support as DSME strike continues

A police helicopter flies over the Daewoo Shipbuilding & Marine Engineering shipyard in Geoje, South Gyeongsang, on Friday as the turmoil from the company’s contractors continues for the 51st day. [NEWS1]

As the strike by Daewoo Shipbuilding & Marine Engineering (DSME) contractors continues, the Korea Development Bank (KDB), DSME’s largest shareholder, has announced that it will not provide additional support if losses increase. Bankruptcy is also considered the worst case scenario.

“The DSME strike may lead to huge losses and deterioration of liquidity,” a KDB official said on Friday. “As a reference shareholder, we are studying all possible methods. In principle, additional support is not possible.

The KDB assumes that the best solution would be to end the strike and normalize business, but sees bankruptcy as an option to consider if insolvency extends due to the prolonged strike.

If creditors discontinue financial support to DSME, DSME will face severe liquidity difficulties and will likely have to file for relief.

DSME continues to suffer operating losses due to an industry slowdown and rising commodity prices, and the company is expected to struggle to fend for itself without the support creditors in a situation where there are no additional assets to sell due to the restructuring.

According to the KDB, the total losses DSME will incur due to the contractors’ strike are estimated at 816.5 billion won ($622.2 million) by the end of this month. This figure will rise to 1.359 billion won next month if the strike continues.

BY LIM JEONG-WON [[email protected]]

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