STX Shipyard Doubles Orderbook Before a Possible Privatization
South Korea’s struggling shipyard STX Offshore & Shipbuilding Co. announced that it has received a series of orders for new tankers that will effectively double the yard’s orderbook and provide two years of additional work. News of the orders comes as the Korean government is continuing efforts to privatize the financially troubled company.
STX reported a total of 12 orders for tankers to be built at the company’s remaining shipyard in Jinhae, approximately 250 miles southeast of Seoul. These contracts bring the yard’s orderbook to a total of 28 vessels with an option for two additional oil tankers. In the summer of 2020, STX reported that its orderbook was down to just seven ships.
The contracts range between two 10,000-ton petrochemical carriers, six 50,000-ton chemical tankers, and four 115,000-ton oil tankers with an option for two additional vessels, STX said. Deliveries range between the fourth quarter of 2022 and the end of 2023. They did not identify the value of the contracts nor the shipowners.
News of the orders was welcomed by the beleaguered shipyard. Once one of the largest shipbuilders in the world, STX had expanded into an international network before its financial troubles began. In 2013, they launched their first debt restructuring effort, but six years ago the company was forced to file for court receivership. In 2018, the Korean Development Bank (KDB), the yard’s main creditor, proposed court receivership for the yard but later accepted a self-rescue plan from STX that included an agreement with its union for a 75 percent cut in labor costs through voluntary retirement, outsourcing, and a reduction in employee benefits.
STX had employed 1,500 people in Korea in 2017, but through its downsizing efforts had reduced employment to just 500 people last year. Desperate to further lower costs, the yard had been placing workers on unpaid leave, which led to a strike in the spring of 2020 and a stop on all work in June 2020. The company was pursuing additional cost-cutting efforts when it was announced that KDB had begun an auction to sell the yard possibly to a private investment or turnaround firm.
Korea’s Yonhap News Agency reported last November that the creditors had selected a consortium comprising local private equity fund KH Investment and United Asset Management Company (UAMCO), South Korea's biggest bad debt investor, to take control of the troubled shipbuilder. The closing of the transaction was expected at the end of 2020 but was delayed.
STX’s shareholders recently agreed to a reverse split of the company’s shares on a basis of 42 to 1 reports Yonhap as part of an effort to improve the yard’s financial strength. If the deal to sell the shipbuilder is finalized, STX Offshore announced that its operations will be renamed K Shipbuilding, but no timeline was announced for finalizing the terms of the sale.