The self-rescue plan submitted by South Korea’s Samsung Heavy Industries on Tuesday in exchange for relief in debt worth 2.9 trillion won ($2.4 billion) has failed to satisfy its main creditor Korea Development Bank (KDB), according to multiple industry sources. The world’s third-largest shipbuilder had asked KDB to extend loans that are set to expire early next year and handed in a voluntary restructuring plan, but the state-run bank has decided to ask for a more radical plan that involves active role by the parent Samsung Group.

An unnamed official from KDB said on Thursday that it has judged that the self-rescue plan submitted recently by Samsung Heavy Industries is not entirely satisfactory and decided to ask the shipbuilder on Friday to introduce supplement measures.

“We will ask (the shipbuilder) to include measures that involve liquidity support from Samsung Group as we judged that voluntary cost-cutting and fund-raising efforts from Samsung Heavy Industries are makeshift,” the KDB official said.

The official, however, noted that the KDB will not directly indicate what kind of specific support measures, leaving the decision up to Samsung management.

On Tuesday, Samsung Heavy Industries pitched to KDB that if the main creditor rolls over 2.9 trillion won worth of debt payment, it will be able to normalize its business based on self-rescue efforts. After reviewing the shipbuilder’s voluntary restructuring plan, however, the KDB has concluded that the efforts - including cutting workforce, reducing the number of dockyards, and selling assets - cannot guarantee long-term viability amid foggy prospects on the global front.

Another official from KDB who asked to be unnamed complained that Samsung appears to be taking too lightly of the challenges it faces. The official noted that the shipbuilder does not have that many assets to sell to improve liquidity.

Samsung Heavy Industries’ self-rescue scheme has also failed to meet expectations of other creditors that individually would determine debt relief. Some creditors have suggested that they would evaluate Samsung Group’s overall credit risk and decide whether or not to reschedule debt based on new self-rescue plan.

A senior creditor official who asked to be unnamed said that Samsung Group affiliates including Samsung Heavy Industries are connected through a very complex cross-shareholding structure and that the financial standing of interconnected affiliates is an important factor on evaluating the company’s future credit risk. The official added that this is even more so for economy-sensitive industries like shipbuilding, construction, and plants.

Meanwhile, the KDB is known to be looking into the fact that Samsung Heavy Industries’ short-term loans have increased by 1 trillion won in the first three months of the year alone. The shipbuilder has been suffering from deteriorating liquidity as it has not received any orders since the end of October last year, and its existing offshore plant projects have been suspended due to protracted slump.

An unnamed official from Samsung Heavy Industries noted that the short-term loans include 400 billion won worth of financing to build ships.

Samsung Group reportedly is reluctant to step forward to aid the shipbuilding unit at current stage and likely wage a tug-of-war of tensions with creditors.

By Park Yong-beom, Ahn Doo-won, Chung Seok-woo

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