State-owned Korea Development Bank (KDB) offered refund guarantee on orders of 11 vessels that STX Offshore & Shipbuilding Co. has won this year on the condition that the company carries out restructuring including a 30 percent cut in fixed costs.

A senior official at KDB said on Tuesday the state lender and the creditors of STX Offshore & Shipbuilding decided to give the shipbuilder the last chance to normalize its operation as it plays an important role in the nation’s shipbuilding industry and makes contributions to regional economy and job market.

The bank within this week will issue refund guarantee for 11 ship orders - including options to build four ships - STX secured during July to September. KDB is reported to have made the decision after taking into account of the STX’s financial status and request from the local government of South Gyeongsang Province in which the shipbuilder is headquartered.

Thanks to the court-led reorganization program which STX began last year and graduated from in July this year, the repayment due for its debt worth 1.1 trillion won ($1 billion) has been extended to 2022. According to sources, STX owns about 150 billion won in its cash reserve and can afford to secure up to 300 billion won through asset sales. KDB’s refund guarantee, which is essential in new shipbuilding agreement, will be issued with the shipbuilder’s 150 billion won worth cash assets chained as the collateral.

In exchange for the issuance of the refund guarantee, the state bank asked the shipbuilder to lay out a strict self-rescue scheme including a 30 percent cost cut, downsizing and wage freeze, according to sources. STX is expected to find ways to streamline other than a massive layoff as it needs workers to build ships, sources said. The management and labor union of STX recently pledged to do their best to implement the rescue plan to KDB.

By Roh Seung-hwan and Choi Mira

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]