Creditors approve Hyundai Heavy's self-rehabilitation program

By Park Sae-jin Posted : June 1, 2016, 13:11 Updated : June 1, 2016, 13:11

[Courtesy of Hyundai Heavy Industries]


Creditors have approved self-rehabilitation measures proposed by Hyundai Heavy Industries, paving the way for the world's largest shipyard to keep its troubled business afloat and avoid the risk of defaults, a bank said Wednesday.

The shipbuilder's self-rescue plan approved by creditors contained the sale of stocks, non-core assets, real estate and a cut in its workforce, KEB-Hana Bank said.

Hyundai Heavy's debt stood at 8.5 trillion won (7.14 billion US dollars) with its debt ratio standing at 134 percent. By 2018, the shipyard aims to reduce its debt to six trillion won and its debt ratio to less than 100 percent.

"With its self-rehabilitation plan approved, Hyundai Heavy will be able to speed up its restructuring," a KEB-Hana official said.

South Korea's shipbuilding industry, which accounts for 6.5 percent of gross domestic product, has played a key role in South Korea's rapid industrialization. Hyundai Heavy and two other major shipyards suffered a combined operating loss of 8.5 trillion won last year due largely to increased costs stemming from a delay in the construction of offshore facilities and a global industrywide slump.

For years, Hyundai Heavy has made rigorous restructuring and cost-cutting efforts to improve its financial status as a slide in oil prices has caused a decline in new orders for facilities. But it suffered a second consecutive year of deficit due to increased costs from a delay in the construction of offshore facilities and order cancellations.

In the first quarter of this year, the shipyard won $1.74 billion worth of overall orders, down 42.3 percent from a year earlier. Its shipbuilding orders tumbled 63 percent on-year to $234 million. A dearth of fresh orders this year prompted Hyundai Heavy to consider an unprecedented choice of closing some of its dry dockyards temporarily.
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