Gov’t to provide additional support to STX Shipbuilding

Creditor banks, which offer 600 billion won (544.7 million U.S. dollars) from April 26 through May 3, have decided to provide additional 600 billion won or more to save cash-strapped STX Offshore & Shipbuilding.

The financial authorities are investigating STX Group Chairman Kang Duk-soo for his personal assets, considering the possibility of the donation of his own assets.

“The 600 billion won injected to STX Offshore & Shipbuilding was urgently needed for the company to pay back maturing bonds and the company`s management for the first half of this year,” a source from creditors said Thursday. “We think it will need more than the amount and are considering options to help it.”

“If we had decided to give only 600 billion won, we wouldn’t have even started the support,” said a high-ranking financial official, adding, “It will get enough funds to revive itself.” This remark appears to show a strong will of the creditors and the government to revive the company given the presence of STX Offshore & Shipbuilding in the Korean economy.

STX Offshore & Shipbuilding have maturing bonds worth 300 billion won (272.3 million dollars) in total on Saturday and next Tuesday. Furthermore, it should deal with maturing bonds of 100 billion won (90.7 million dollars) in July and 910 billion won (826.1 million dollars) in the first half of next year. If it adds costs for shipbuilding, it will need a snowballing amount of funds.

The financial authorities are considering options to alleviate the loan burden of the company. A government official said, “As soon as the due diligence is over for the agreement between creditors and the company, we’ll release a package of support such as a lower interest rate and extending maturities.” If the actions are taken, STX will have some leeway in liquidity as it will have to pay much less interests.

The government plans to ask Kang to step down from management in return for an extraordinary aid package. A source from the government said, “The largest shareholder should take hands off from the group to revive the company.” The financial authorities see that Kang has to take a step back to get the funds.

STX Offshore & Shipbuilding has decided to sell off STX France and STX Finland, its European subsidiaries. STX expects it can make up to one trillion won (907.8 million dollars) by selling them.

january@donga.com