With STX Offshore & Shipbuilding headed for court receivership early next month, many more may have to follow as both big and small shipbuilders lose ground in the sector shaken by prolonged slump and overcapacity.

SPP Shipbuilding Co. is likely to follow STX to court in July while another player Daehan Shipbuilding Co. could be liquidated in October. A handful of smaller dockyards face domino knockdown.

An unnamed official from SPP Shipbuilding’s creditor group said on Wednesday that talks to sell SPP Shipbuilding to Samra Midas Group (SM Group) will most likely fall through on Friday. The remaining option is to send the company to the bankruptcy court to decide its fate. As with STX, creditors believe they no longer can sustain SPP amid little sign of hope on the external front and dearth of new work orders.

In March, SM Group had signed a memorandum of understanding with creditors to buy SPP Shipbuilding after being selected as the preferred bidder. Woori Bank Co., the shipbuilder’s main creditor, has given SM Group until Friday to comply with the pledge. SM Group reportedly bowed out citing discrepancy in sale price.

SPP Shipbuilding received more than 3 trillion won ($2.5 billion) in fresh loans from creditors including Export-Import Bank of Korea (Exim Bank) and Woori Bank since it went under creditors’ bailout program in May, 2010. The life line failed to revive the company against subdued demand.

Woori Bank wanted to issue a public notice for a resale, but was stopped by Exim Bank, the largest creditor and shareholder of SPP Shipbuilding, as the state bank opts to pull out and take insolvency steps for the company.

Another shipbuilder, Daehan Shipbuilding, is also teetering on the brink of insolvency. Upon expectations that the company would completely run out of orders from October, its creditors have begun to study liquidation option.

The company that relies on order from Daewoo Shipbuilding & Marine Engineering won’t be able to run its dockyard if no additional orders arrive, and creditors believe it would be best to liquidate the company to claim whatever is left.

Other smaller players face similar fate. Sungdong Shipbuilding & Marine Engineering Co. and Dae Sun Shipbuilding & Engineering Co. may be forced under court management or other insolvency actions by their creditors after review this month.

By Park Yong-beom and Chung Seok-woo

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