STX Offshore Seeks Corporate Restructuring Amid Serious Debt Issues

STX Dalian, Image: STX

By Joyce Lee

SEOUL, April 2 (Reuters) – South Korea’s STX Offshore & Shipbuilding Co Ltd is seeking a corporate restructuring agreement from its creditors as various asset sales by its parent firm have failed to resolve the ailing shipbuilder’s mounting debt problems.

STX Offshore & Shipbuilding asked creditors to help resolve the shipbuilder’s liquidity crunch caused by the sector’s prolonged downturn in return for restructuring efforts, its parent firm, STX Corp, said in a statement on Tuesday.

Representatives of creditor banks, including main creditor Korea Development Bank (KDB), Export-Import Bank of Korea , Nonghyup, Woori Bank and Shinhan Bank met on Tuesday to discuss the agreement.

The banks could reach a decision as soon as this week, a source with direct knowledge of the matter told Reuters.

Shares in STX Offshore & Shipbuilding and affiliates fell or nearly fell by the daily limit of 15 percent, while the local currency declined against the dollar on Tuesday as STX Offshore’s request for creditor support added to risk aversion.

Shares in financial holding companies such as Woori Finance Holdings also slid more than 5 percent as their banking units’ exposure to the STX unit was expected to be in the hundreds of billions of Korean won.

STX Offshore & Shipbuilding reported a net loss of 782 billion won ($701 million) in 2012 compared to a 168 billion won net profit in 2011.

The shipbuilder also had a consolidated debt of 12.2 trillion Korean won as of end-2012 with equity of 1.31 trillion won, leading to a debt ratio of 927.7 percent.

STX Corp, a holding company of STX Group, raised a total 1.13 trillion won by shedding assets including a stake in affiliate STX Energy and the controlling stake in Singapore-listed STX OSV Holdings since last year.

However, the sales were not enough to solve the shipbuilder’s liquidity issues due to falling ship prices following the global financial crisis, disadvantageous payment conditions in a buyer’s market and difficulties in issuing corporate bonds, STX Corp said.

An attempt to sell off the controlling stake in affiliate shipper STX Pan Ocean Co on Friday failed to attract any bids.

($1 = 1114.8000 Korean won) (Editing by Matt Driskill)

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