The government and the creditors to Daewoo Shipbuilding & Marine Engineering will institute a debt-to-equity swap worth 3 trillion won separate from the 3-trillion-won new money injection to the ailing shipbuilder. This is because the company will need recapitalization due to its net loss of 2.71 trillion won last year as well as the loans of more than 3 trillion won coming due until the year's end. But the government insists that it would lend the money only if the commercial bank lenders and corporate bond holders offer to share some of the burdens.
According to banking industry sources, the government's plan to relieve Daewoo's liquidity problem to be announced on March 23 will be worth about 6 trillion won including 3 trillion won in a new capital injection and 3 trillion won through the debt-to-equity swap. The shipyard is faced with a situation where it has to get a capital injection only three months after it got recapitalization worth 2.8 trillion won from state-run banks at the end of last year. A creditor bank official said, "Daewoo will be able to withstand the current order drought if the debt-to-equity swap is over 3 trillion won."
The government, however, insisted that commercial banks roll back their credit line to Daewoo to the previous level of 4.6 trillion won before June 2015 and bond holders agree to bond expiration date extension. The government plans to push for a conditional qualified consent among state-run and commercial banks if the debt readjustment attempt is not working out. A government official said, "Although we do not rule out a possibility of a corporate workout program, its possibility is rather low."