Both minority as well as the majority share holders would have to comply with a stock capital reduction for Daewoo Shipbuilding & Marine Engineering Co. (DSME), a scheme the shipbuilder cannot avoid in order to stay publicly trading and sustainable company, said Lee Dong-geol, president of state-run Korea Development Bank (KDB).

“Large shareholders have their share of responsibility in a company. Individual minority shareholders also to some extent have to live up to their liability,” Lee told a parliamentary audit session when asked about the stock capital reduction plan.

The government previously hinted of equity capital reduction in the shipbuilder owned mostly by state entities to bolster its capital base before implementing debt-to-equity swap to inject fresh funds. The shipbuilder could be kicked out of the main bourse if it does not meet capital adequacy requirements by the time it reports fiscal 2016 settlements.

The KDB and government as the majority shareholders would have to take up the losses by doing their part, but minority shareholders inevitably may also have to share some of the pain, said a government official.

But minority shareholders won’t likely be happy with the plan as they blame former and incumbent management of DSME recruited by the government and financial authorities that had been lax in oversight for ruining the shipbuilder.

As of the end of June this year, the major creditor KDB has the largest stake of 49.7 percent in DSME, followed by the Financial Services Commission with 8.5 percent and DSME employees with 2.5 percent. The remaining 39.3 percent is spread out to individual shareholders.

The stock reduction ratio would likely be bigger for large shareholders and the share lesser for the minority interest owners if the plan goes through.

The company’s stock trading has been suspended since July 14 and it has been given a year until September 28, 2017 by the Korean stock market operator to improve its financial health before its stock trading can resume.

By Park Yong-beom and Chung Seok-woo

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