Press Release
June 8, 2016
RESTRUCTURING PLAN FOR SHIPPING & SHIPBUILDING INDUSTRIES
AND
MEASURES FOR RECAPITALIZATION OF POLICY BANKS
The government held a ministerial meeting1 chaired by Deputy Prime Minister to discuss
restructuring plans for shipping & shipbuilding industries and measures to boost capital at
state-run banks to fund the restructuring.
I. Restructuring of Shipping & Shipbuilding Industries
[1] Shipping Industry
▪ Hyundai Merchant Marine (HMM)
The creditor group agreed on the company’s debt restructuring proposal on condition that
HMM would successfully conclude its negotiations with bond holders and shipowners; and
HMM would join a shipping alliance. HMM already gained bond holders’ approval for its
debt restructuring proposal; and is expected to conclude its negotiations with shipowners
on its chartered rates by this week. The government plans to keep supporting HMM to join
the Alliance.
▪ Hanjin Shipping
Hanjin is now undergoing negotiations with 22 shipowners on charter rates and planning to
meet with bond holders to restructure its debt. Hanjin is required to make its self-rescue
efforts to secure liquidity as HMM did, while the government keeps supporting the
company get back on track.
[2] Shipbuilding Industry
The ‘Big Three’ – Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo
Shipbuilding & Marine Engineering – have prepared self-rescue plans in case of further
slumps and economic downturn.
▪ Hyundai Heavy Industries (HHI)
HHI plans to raise KRW3.5 trillion by selling non-core assets, streamlining management
and reshuffling businesses. Creditor banks evaluate that HHI’s self-rescue plan will be able
to withstand further cuts in orders than current estimates.
▪ Samsung Heavy Industries (SHI)
SHI prepared its self-rescue plan of KRW1.5 trillion including measures to secure liquidity
such as issuance of asset-backed securities or paid-in capital increase. Although SHI’s
self-rescue plan is relatively small in size, creditor banks view the plan is appropriate in that
1
Ministry of Strategy and Finance (MOSF), Ministry of Trade, Industry and Energy (MOTIE), Ministry of
Employment & Labor (MOEL), Financial Services Commission (FSC)
it includes the liquidity measures.
▪ Daewoo Shipbuilding & Marine Engineering (DSME)
DSME has submitted an additional self-rescue plan of KRW 3.5 trillion as creditor banks
asked for stronger measures to secure liquidity in addition to its previous plan of KRW 1.85
trillion submitted in October 2015. Creditor banks evaluate that the additional plan is solid,
given DSME’s previous plan is now underway.
Smaller shipbuilders including Sungdong, Daesun and SPP are required to push for strong
self-rescue efforts and downsizing, while there will be no additional liquidity provision by
creditors except for previously approved provision.2
II. Measures for Recapitalization of State-Run Banks
The government and the Bank of Korea (BoK) decided to boost capital at two state-run banks
– the Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM) – to
fund restructuring of shipping and shipbuilding companies. By the government’s estimate, the
amount of additional capital that state lenders would need ranges from KRW 5 to 8 trillion.
The estimation was made on the assumption that KDB and KEXIM would meet the BIS
capital ratios of 13% and 10.5% respectively under the Basel III and simulated various
scenarios for restructuring of cyclically sensitive sectors including shipping and shipbuilding
industries.
The government outlined a basic framework for recapitalization, in which the government will
directly inject KRW1 trillion of capital into KEXIM; and the government and the BoK will jointly
create a ‘Recapitalization Fund’ of KRW11 trillion.
The Recapitalization Fund, which consists of KRW10 trillion from the BOK and KRW 1 trillion
from the IBK, will purchase contingent convertible bonds (CoCos) from KDB and KEXIM. The
Fund is scheduled to launch in July 2016 and run by the end of 2017.
The government will push for the state lenders’ intensive self-rescue plans to prevent moral
hazard and reduce burden on taxpayers in the process of recapitalization.
FRAMEWORK FOR RECAPITALIZATION OF STATE-RUN BANKS
2
STX filed for court receivership on May 27, 2016.
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III. Supports for Employment & Provincial Economies in Restructuring of Shipbuilders
The government seeks for measures to minimize impacts that restructuring of shipbuilders
would have on employment and provincial economies. The government will decide whether
to designate the shipbuilding industry as a sector that requires special supports for
employment and announce details of supportive measures by the end of June.3 The
government will provide supports for smaller affiliated businesses and merchants in provincial
areas where shipyards congregate to prevent chilling effect on their economic conditions from
the industry’s restructuring.
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For any inquiry, please contact Foreign Press & Relations Team at [email protected]
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For further details of the supportive measures, contact the Ministry of Employment and Labor (MOEL)
www.moel.go.kr/english
3