Struggling South Korean shipbuilder STX Offshore & Shipbuilding Co. on Friday filed for receivership with the Seoul Central District Court amid mounting debt and continued losses.
Struggling South Korean shipbuilder STX Offshore & Shipbuilding Co. could face liquidation as a result of a financial restructuring agreement with creditors.
STX on Friday filed for receivership with the Seoul Central District Court amid mounting debt and continued losses. The court will now be tasked with deciding whether to restructure the firm’s debts once again or begin the process of selling off assets to repay them. The latest announcement came just two days after the company’s creditors cut off its financial lifeline after years of assistance failed to keep the company afloat.
Once Korea’s fourth largest shipbuilder and a member of the now defunct STX Group, STX was placed under the control of its creditors in April 2013 as orders for new vessels stagnated across the industry.
According to Korean news agency Yonhap, the company has received over 4.45 trillion won (U.S. $3.77 billion) in financial assistance from creditors since then, but has been unable to right the ship. STX posted operating losses of 1.5 trillion won and 314 billion won in the last two years.
In total, STX’s debt is estimated at 5.5 trillion won, with the state-run Korea Development Bank and Export-Import Bank of Korea bearing the majority of the financial exposure at 3 trillion won and 1.22 trillion won, respectively.
“If the court receivership application is delayed, it could cause problems related to issues such as maturing debts,” a bank official told Yonhap. “So we decided to proceed with the process as soon as possible.”
STX Offshore & Shipbuilding is one of several Korean shipyards that have been suffering as demand for ocean vessels has waned due to overcapacity and construction of offshore facilities has been delayed thanks to massive declines in the price of crude oil.
The country’s Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co., the three largest shipbuilders worldwide, are also struggling to repay massive debts.
The South Korean government in April said it would take more active steps to help the nation’s shipping and shipbuilding industries reduce debt and weather the global slump.
Financial analysts tell the Wall Street Journal they expect several smaller Korean shipyards to close in the near future to the benefit of their larger rivals.
“Korean yards, undisputed market leaders in the past 20 years, are talking about capacity reduction for the first time. Post restructuring, we expect to see some bigger shipyards enjoy enhanced bargaining power,” said Citi Group analyst Ethan Kim.
STX Shipbuilding faces restructuring, possible liquidation
