Daewoo Shipbuilding & Marine Engineering (DSME) could face a further loss of more than KRW1 trillion (USD872 million) in addition to its posted KRW2.3971 trillion loss in the second half of 2015.
The original loss by South Korea’s third largest shipbuilder had been expected after it admitted to omitting up to KRW3 trillion in offshore plant project losses from its balance sheet.
It is reportedly said that the additional losses are likely to come from the ongoing due diligence process that has been conducted by state-owned policy bank Korea Development Bank (KDB) that is now reaching its final stage. KDB is both a major shareholder and creditor of DSME.
Financial authorities are reported as saying that if losses from overseas subsidiaries are strictly reflected in DSME’s performance, the shipbuilder is more likely to have further shortfalls of more than KRW1 trillion.
The authorities said that the decision to measure the additional deficit would be made “in a highly professional manner” in terms of accounting.
The total may possibly be decreased, depending on the creditors’ accounting methods.
Meanwhile, KDB’s chairman, Hong Ki-taek, testified at a parliamentary inspection of the bank on 7 October about possible further losses at DSME.
KDB has been conducting due diligence on DSME since July and the Export-Import Bank of Korea, which offered the biggest credit to the shipbuilder, launched a separate due diligence early in September.
When the additional loss is confirmed, DSME’s management condition and restructuring plans will be announced.