‘Pouring KRW 6.7 trillion in a sieve’ for DSEM again… after 1 year and 5 months
Kang Eun Seong | esther@ | 2017-03-24 10:00:34
Precious tax money of KRW 2.9 trillion to be paid for DSME
The government is planning to provide KRW 6.7 trillion in financial support for DSME (Daewoo Shipbuilding & Marine Engineering). The amount of direct funding is KRW 2.9 trillion and the indirect support through the conversion of capital and the extension of the maturity reaches KRW 3.8 trillion. DSME has received huge amounts of precious tax money in the amount of KRW 4.2 trillion since October, 2015. The government is planning to support DSME 1 year and 5 months later despite of gloomy future of the company.
The government held the 11th Ministerial Meeting on Strengthening Industrial Competitiveness in Seoul Gwanghwamun at Government``s Seoul Administration and discussed strategies to promote restructuring of DSME on March 23. The government decided to provide a total of KRW 7 trillion in financial support to DSME at the meeting, which faces a liquidity crisis.
The main creditor banks, KDB Korea Bank (KDB) and KEXIM (Export and Import Bank of Korea) will provide total of KRW 2.9 trillion in new funds to DSME.
President of the Korea Development Bank, Lee Dong-geon said, ‘We decided to support the new fund on the assumption that all the creditors will participate in the autonomous debt restructuring as the most efficient way to continue the normalization of DSME.’
The new funding plan is expected to support dividing the additional shortfall into the limit loan format. The financial committee estimates that the deficit of DSME is up to KRW 5 trillion. However it is expected to reach KRW 150 billion for corporate bonds and CP debt, KRW 400 billion for the remaining amount of new funds which was decided in October 2015, KRW 300 billion for financing costs. Therefore it is estimated to be KRW 2.9 trillion.
In accordance with the stakeholder``s principle of loss sharing, including Korea Development Bank and Export and Import Bank of Korea, the conversion of creditors and the expiration of maturity will be widely carried out.
50% will be invested and the remaining 50% will be extended of the corporate bonds and CP’s KRW 1.5 trillion. The extension of the maturity is a three-year installment repayment with a 3% interest rate after three years. The unsecured bonds held by the commercial banks of KRW 700 billion will be invested 80% and extend 20%. It is a form of partial repayment for five years after a five-year grace period. Korea Development Bank and Export and Import Bank of Korea decided 100% conversion of investment in unsecured bonds worth KRW 1.6 trillion. The total amount of the conversion of investment is KRW 2.9 trillion and the maturity extension is KRW 900 billion. DSME will receive KRW 3.8 trillion in indirect financial support.
Lim Jong-ryong, chairman of the finance committee, said in a briefing, ‘We are sorry for citizens as we will give additional support to DSME after 2015.’ There is a report that the loss of Korean economy will reach KRW 52 trillion. We decided that we needed more support than the liquidation. Therefore we decided to give additional support. "
He also emphasized, ‘The scale of support is based on the assumption of the worst situation and may be even smaller. DSME will have to concentrate on normalization through self-salvation. It is necessary to share the suffering of all stakeholders.’
By Kang Eun Seong, Cho Eun Gook esther@
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The government is planning to provide KRW 6.7 trillion in financial support for DSME (Daewoo Shipbuilding & Marine Engineering). The amount of direct funding is KRW 2.9 trillion and the indirect support through the conversion of capital and the extension of the maturity reaches KRW 3.8 trillion. DSME has received huge amounts of precious tax money in the amount of KRW 4.2 trillion since October, 2015. The government is planning to support DSME 1 year and 5 months later despite of gloomy future of the company.
The government held the 11th Ministerial Meeting on Strengthening Industrial Competitiveness in Seoul Gwanghwamun at Government``s Seoul Administration and discussed strategies to promote restructuring of DSME on March 23. The government decided to provide a total of KRW 7 trillion in financial support to DSME at the meeting, which faces a liquidity crisis.
The main creditor banks, KDB Korea Bank (KDB) and KEXIM (Export and Import Bank of Korea) will provide total of KRW 2.9 trillion in new funds to DSME.
President of the Korea Development Bank, Lee Dong-geon said, ‘We decided to support the new fund on the assumption that all the creditors will participate in the autonomous debt restructuring as the most efficient way to continue the normalization of DSME.’
The new funding plan is expected to support dividing the additional shortfall into the limit loan format. The financial committee estimates that the deficit of DSME is up to KRW 5 trillion. However it is expected to reach KRW 150 billion for corporate bonds and CP debt, KRW 400 billion for the remaining amount of new funds which was decided in October 2015, KRW 300 billion for financing costs. Therefore it is estimated to be KRW 2.9 trillion.
In accordance with the stakeholder``s principle of loss sharing, including Korea Development Bank and Export and Import Bank of Korea, the conversion of creditors and the expiration of maturity will be widely carried out.
50% will be invested and the remaining 50% will be extended of the corporate bonds and CP’s KRW 1.5 trillion. The extension of the maturity is a three-year installment repayment with a 3% interest rate after three years. The unsecured bonds held by the commercial banks of KRW 700 billion will be invested 80% and extend 20%. It is a form of partial repayment for five years after a five-year grace period. Korea Development Bank and Export and Import Bank of Korea decided 100% conversion of investment in unsecured bonds worth KRW 1.6 trillion. The total amount of the conversion of investment is KRW 2.9 trillion and the maturity extension is KRW 900 billion. DSME will receive KRW 3.8 trillion in indirect financial support.
Lim Jong-ryong, chairman of the finance committee, said in a briefing, ‘We are sorry for citizens as we will give additional support to DSME after 2015.’ There is a report that the loss of Korean economy will reach KRW 52 trillion. We decided that we needed more support than the liquidation. Therefore we decided to give additional support. "
He also emphasized, ‘The scale of support is based on the assumption of the worst situation and may be even smaller. DSME will have to concentrate on normalization through self-salvation. It is necessary to share the suffering of all stakeholders.’
By Kang Eun Seong, Cho Eun Gook esther@