Korea Development Bank and creditors find additional $861m losses in Daewoo Shipbuilding
South Korea's second largest shipbuilder, Daewoo Shipbuilding & Marine Engineering, has been found to have an additional KRW 1tn ($861m) in losses from its overseas units, which have not yet been reflected in its balance sheet, say sources. The shipyard posted a KRW 2.39tn ($2.09bn) in net deficit for 2Q2015, a huge turnaround from a KRW 76bn profit ($66.5m) profit during the same period a year earlier.  Its creditors, led by Korea Development Bank (KDB), are now carrying out thorough inspections of the shipbuilding's financial condition, with a restructuring plan expected later this month.  As we noted last month, the Financial Services Commission (FSC) has told KDB to sell its stakes in Daewoo Shipbuilding, following accusations against KDB over its lack of checks on the﻿ company.

Troubled Daewoo Shipbuilding & Marine Engineering may have an additional 1 trillion won ($860 million) in losses from overseas affiliates, adding more pressure to the shipbuilder that already reported its worst-ever operating loss of 3 trillion won in the second quarter, a recent audit on the firm found.According to industry sources on Sunday, the massive losses were caused by underperforming affiliates abroad including Daewoo Mangalia Heavy Industries in Romania and German wind turbine manufacturer DeWind.“There’s a high possibility that the additional loss from overseas affiliates could surpass 1 trillion won,” a source involved in an audit conducted by the shipbuilder’s main creditor Korea Development Bank said. The inspection result is expected to be announced by the end of October.Daewoo Shipbuilding reported an operating loss of 3.03 trillion won in the second quarter of this year, blaming fewer orders as a sluggish global economy and low freight rates discourage shipowners from buying new vessels.But the country’s third-largest shipbuilder’s quarterly report did not include the losses from its overseas affiliates.In May, new CEO Jung Sung-leep pledged to dispose noncore, loss-making affiliates to focus on shipbuilding and offshore plant construction businesses.Industry experts expected that Daewoo-Mangalia Heavy Industries and DeWind will be on sale as they suffer from financial difficulties. KDB will set up a full-fledged organizational restructuring plan for DSME and its affiliates.According to sources, even if the bank adds 1 trillion won in capital, DSME’s debt ratio will remain huge at 516 percent from 648 percent.Meanwhile, some 119 shareholders of DSME filed a compensation suit in September against the firm for its alleged accounting fraud.By Park Han-na ( hnpark@heraldcorp.com