South Korea’s Daewoo Shipbuilding & Marine Engineering Co. (DSME) is struggling to get its labor union workers to agree to the conditions that are necessary for the debt-ridden shipbuilder to receive fresh funds from its creditors, raising the risk that DSME could file for court receivership.

An unnamed official at DSME’s largest creditor Korea Development Bank (KDB) said on Wednesday that creditors had aimed to determine the overall capital reduction and fresh fund injection plan by November 9 under the condition that the labor union agree to participate in the management’s rehabilitation plans, but the union has strongly opposed to take part as of Thursday despite DSME President and CEO Jung Sung-leep’s efforts to persuade them.

DSME creditors have made clear that they would inject fresh funds to salvage the financially-troubled shipbuilder and carry out capital reduction to prevent the company from being delisted from the country’s stock bourse only if its unionized workers agree to refrain from going on strike and take part in the company’s other self-rescue measures that include cancelling employees shares to improve capital structure.

The country’s financial authorities and KDB have warned that it would not inject fresh funds and reduce capital if DSME is not able to get consent from the labor union for the business normalization plans before KDB board of directors meeting on November 18. Should the plans be called off, DSME is likely to be at risk of falling under court receivership.

The creditors earlier this month announced plans to increase DSME capital by 2.8 trillion won ($2.4 billion) including 1.8 trillion won by KDB through debt-equity swap and 1 trillion won by Export-Import Bank of Korea through perpetual bond purchase. KDB has also announced plans to cancel 60 million DSME shares it has as of October last year while other shareholders including Financial Services Commission, DSME employees stock holders association, and minority shareholders cancel one-tenth of their equity.

In October last year, the creditors decided to inject 4.2 trillion won worth of financial aid to bail out the sinking DSME amid dwindling ship orders due to a prolonged slump in the global shipbuilding.

By Chung Seok-woo, Moon Ji-woong

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