A Triple-E class vessel, under construction In floating drydock at the DSME shipyard in S. Korea. Photo by Maersk
By Michael S. Arnold
(Bloomberg) — Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipbuilder, rose by the most in nearly two years after its chief executive informed employees of a coming restructuring and amid a report of financial assistance from its largest shareholder.
Daewoo Ship closed up 14 percent Tuesday at 8,520 won in Seoul, its largest daily gain since October 2014, after rising as much as 21 percent in the morning. Last week the stock became the first to fall by 30 percent in a day since South Korea widened its daily trading limits in June, following reports that massive losses could drive the shipyard to restructure its debt.
Tuesday’s rebound came after Chief Executive Officer Jung Sung Leep told employees the company is embarking on a restructuring that will include some staff relocations and the sale of non-operating assets, Daewoo Ship said in an e-mailed statement late Monday. The company has suffered large losses because of rising shipbuilding costs and some errors in engineering and processing on certain projects, but can likely avoid a voluntary debt restructuring, Jung said, according to the statement.
The Korea Economic Daily reported Tuesday that Korea Development Bank, Daewoo Ship’s largest shareholder, plans to buy 1 trillion won ($863.4 million) of equity and offer 1 trillion won in new loans. The report, citing unidentified officials in the financial industry, said KDB would announce the plan Tuesday.
KDB and Daewoo Ship both declined to comment on the report.
Shares of South Korea’s other large shipyards also gained Tuesday, with Samsung Heavy Industries Co. rising 3.6 percent and Hyundai Heavy Industries Co. closing up 6.1 percent.
The Seoul Economic Daily reported Tuesday that Korea Gas Corp. would set up a venture with the Big Three shipyards to build LNG carriers. The report cited an unidentified government official.
Daewoo Ship posted a loss of 138.7 billion won in the first quarter, excluding minority shareholdings, compared with a 75.9 billion won profit a year ago, because of costs arising from delays in building rigs for Songa Offshore SE. The company may report an operating loss as large as 3 trillion won in the second quarter, according to Yonhap Infomax.
–With assistance from Shinhye Kang in Seoul.
©2015 Bloomberg News
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