STX May Get Financial Lifeline
Creditors of the embattled Korean shipyard STX are said to be considering financial relief of $385 million as the yard cuts back on staff and business areas.
STX was once the world's fourth-largest shipbuilder, but like other Korean and Chinese yards it has battled strong headwinds as the offshore industry and other sectors have contracted. It also has experienced revenue pressure from unprofitable deals brokered before 2013 and from penalties paid to shipowners from late deliveries.
As with its competitors, STX is highly leveraged. Collectively it owes some $3.6 billion to its Korean creditors, who are said to be debating whether to support or liquidate the business.
The company is pursuing a radical restructuring plan to win back their support and stem its losses. This month it cut staff by 30% and offered eight months' wages to employees choosing to leave voluntarily. STX has also announced a contraction to focus on its core legacy business of product and chemical tankers.
Korean government officials have suggested that STX and other struggling domestic shipyards owe so much that they pose a systemic risk to the country's economy.
The leaked news of cash support will be welcome relief to CEO Lee Byung-Mo, who told employees in mid-November that “if we operate our company the way it is without special countermeasures, we will be short of funds worth hundreds of billions of won in the next three years. The company will face a crisis at the end of this year and collapse in the first half of 2016.”
On Monday Shell announced the construction of a 6,500 cubic meter LNG bunkering vessel to be built by STX and based in Rotterdam. Shell's vote of confidence in signing the new contract may have weighed on the creditors' decision whether to grant the yard relief.