Despite winning a slew of new orders this year, South Korean mid-tier shipbuilder Sungdong Shipbuilding & Marine Engineering is still suffering from a shortage in operating funds.
Due to this, its suppliers and local politicians have appealed to Sungdong’s creditor banks for financial support.
Sungdong has sought KRW420 billion (USD385 million) to construct ships and to pay employees.
The Export-Import Bank of Korea, which holds 51.4% of Sungdong’s debt, agreed to the funds injection plan, but Korea Trade Insurance Corporation (Ksure) and Woori Bank, which hold 20.39% and 17.01% of debt respectively, refused to accept the plan.
If Korea EXIM Bank attempts to inject an additional fund of KRW420 billion alone, its debt percentage has to reach a minimum of 75% of creditors to approve the plan.
Given this situation, approximately 60 of Sungdong’s suppliers recently appealed for Sungdong’s management recovery to the Ministry of Trade, Industry & Energy, Financial Services Commission, and CEOs of creditor banks.
The suppliers said, “Sungdong has been through a hard time since late 2013 as the global shipping industry entered a sluggish period. Due to management difficulties, Sungdong reduced the number of employees by 3,000 and closed business relations with many suppliers. However, Sungdong has resolved to reorganise its business thanks to a recently increased order book.”
Local politicians in Tongyeong where Sungdong is located held an urgent meeting to discuss possible financial support. At the meeting, Korea EXIM Bank CEO Lee Deok-hoon said, “Sungdong is not likely to maintain its business without help from creditors.”
Ksure CEO Kim Young-hak said, “Sungdong should be rehabilitated when considering the many suppliers. Solving urgent financial difficulties and restructuring efforts are needed.”
Woori Bank CEO Lee Kwang-goo differed. He said, “We are worried over the situation which can harm our financial health if we give additional help to Sungdong.”
Sungdong VP and acting CEO Koo Bon-ik said, “We are on the verge of normalisation of management. We have won orders of 76 vessels to build. Together with South Korea’s Big Three shipbuilders, we want to compete with Chinese players.”