Busan-based Dae Sun Shipbuilding & Engineering has applied for a corporate workout programme to restructure its debts with its main creditor bank, the Export-Import Bank of Korea.
Rising shipbuilding material costs and an acute shortage of shipyard workers appear to have taken a toll on the South Korean shipyard’s finances.
Shipbuilding sources said Dae Sun has not been able to deliver its newbuildings on schedule due to labour supply issues.
One newbuilding project that is said to be affected is Ace Tankers’ stainless-steel chemical tankers.
“We are trying to catch up with our shipbuilding ... we are confident that our shipyard will overcome these problems and will be back on track,” the Dae Sun official said.
Huge debts and big losses were cited as reasons for a liquidity crisis at the medium-size shipyard, which has turned to the state-owned bank for help.
“Dae Sun is re-entering a workout programme with [Korea Exim Bank] for the second time since it was founded in 1945,” a shipbuilding source said.
The first time was about 13 years ago, when a debt restructuring programme led to Korea Exim Bank becoming the shipyard’s major stakeholder.
A Dae Sun official confirmed that his company has applied for a workout programme with its main creditor.
Dae Sun declined to give details of the organisation’s financial status but said rising shipbuilding material costs and “big losses” have caused “damage” to the shipyard.
MR tanker prices soar
“Look at the newbuilding price of MR tankers two years ago ... the ship type cost around $35m to order, but that has increased to $45m to $50m now,” the Dae Sun official said.
According to local news agencies, Dae Sun has incurred a total debt of KRW 457.7bn ($341.2m) as of the first half of this year, up 18.3% from KRW 386.9bn in the same period last year.
The debt-to-equity ratio for the shipyard now stands at 567.3%.
Dae Sun said the filing of the workout programme will not affect its day-to-day operation, but the company’s finances will be controlled by the bank during the workout period.
Shipbuilding sources in South Korea said a workout programme with a creditor bank is a system used by organisations to secure interim liquidity using maturing extensions and financing. Under this programme, the company can preserve its management rights.
Dae Sun confirmed that it is facing rising labour costs and a shortage of yard workers, like most shipyards in the country.
In April 2021, Ace Tankers was reported to have ordered a series of 33,000-dwt stainless-steel chemical tankers at the South Korean shipyard for $47m apiece.
The shipyard was slated to deliver the first newbuilding — Hull No 667 — in May this year. But Clarksons’ Shipping Intelligence Network shows the tanker is now scheduled to be handed over this month.
Dae Sun officials declined to comment on the delivery schedule of its newbuildings, and Ace Tankers has yet to respond to emails seeking confirmation.
Dae Sun is one of the few medium-size shipyards left in South Korea. The shipbuilder is known for constructing feeder container ships and tankers up to handymaxes.
The shipyard was under the control of Korea Exim Bank for 10 years from 2010, with the state-owned bank its major shareholder.
In early 2021, Korea Exim Bank sold its 83% stake to domestic steel manufacturer Dongil Steel for KRW 165bn.
Clarksons’ SIN shows Dae Sun has 18 commercial newbuildings on its orderbook. This includes six stainless-steel chemical tankers from Ace Tankers, nine feeder container ships, two multipurpose vessels and one ropax. The shipyard is also building one training vessel and one research/oceanographic vessel.
