Korean Exchange Tells World's No. 2 Shipbuilder to Improve Financials Or Else

Ships under construction at the DSME shipyard in South Korea. Photo credit: Lappino

By Kyunghee Park

(Bloomberg) — Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipbuilder, was told to improve its financials within a year before its shares can resume trading, the stock exchange said.

The shipbuilder has been given until Sept. 28, 2017 to improve its earnings and balance sheet, the Korea Exchange said in a regulatory filing Wednesday. Shares of Daewoo Shipbuilding will remain suspended until that time.

South Korean prosecutors have been investigating Daewoo Shipbuilding after the company posted its biggest loss last year on write-offs for delayed projects and creditors extended support with 4.2 trillion won ($3.8 billion) of funds to ease a cash shortage. The company is among shipyards restructuring after oil prices that have more than halved in the last two years crushed demand.

South Korea’s prosecutors indicted a former chief financial officer of Daewoo Shipbuilding for allegedly reducing costs of offshore projects that were under construction, helping inflate net income by a cumulative 2.76 trillion won between 2012 and 2014. Two former chief executive officers were also arrested earlier this year as part of the probe, according to the company.

Trading on Daewoo Ship’s shares had been halted since July 14. The stock may be delisted before the 1-year period if the company is found to have failed to make efforts to improve, the exchange said.