Daewoo Stake Sale Held Up On Price

Thursday, February 08, 2001
South Korea's plan to sell a stake in Daewoo Shipbuilding to an Australian firm has stalled and other options to lure foreign capital are being considered, officials at Daewoo and its creditors said. Differences over how to value Daewoo's share price and how well qualified the Australian company is to hold a stake in a shipbuilding firm have helped stall the deal, they said. Newcastle, a company formed by Australia-based investors, expressed interest in Daewoo Shipbuilding early in 2000. Officials at Korea Development Bank (KDB), the main creditor of Daewoo Shipbuilding, said the bank's last official contact with Newcastle was in August. "The price the Australian company has in mind appears to be based on the concept that Daewoo Shipbuilding is a bankrupt company," said I.R. Cho, a KDB official in charge of Daewoo Shipbuilding. KDB officials said creditors would soon meet to discuss how to sell their stake, with an open auction as one option, but nothing had been scheduled yet. Last October, the shipbuilding unit of the former Daewoo Heavy was spun off into an independent entity after creditors wrote off much of its debt through a debt-to-equity swap that left them with a 77 percent stake in the shipbuilder. KDB officials said the purchase price for Daewoo Shipbuilding should be well over 10,000 won per share to reflect the company's growth potential, while Newcastle was reportedly seeking the market price. Shares of Daewoo Shipbuilding fell 200 won to close at 3,870. In December, creditors increased paid-in capital in the shipbuilder to 992 billion won ($785.2 million) via 766 billion won in debt-to-equity swaps. The share was re-listed on the Korea Stock Exchange last week, but trade of the 77 percent stake owned by creditors was put on hold until the end of this year to prevent share prices from falling. Creditors had yet to decide what portion of their shares they would sell, but analysts said creditors' stake should be reduced to below 50 percent in order to cede management control. "A foreign partnership is vital to the revival of Daewoo Shipbuilding because the company's reputation has been shaken badly since it was thrown into the hands of creditors in 1999," said Song Sang-hoon, analyst at Dongwon Economic Research Institute. "But the shipbuilder still must recover further if it wants to look attractive to potential investors." The shipbuilding firm, along with 11 other Daewoo Group companies, was rescued by creditors in August 1999 after a recession the previous year made it impossible to operate. Its backlogged orders, estimated at $4.5 billion, were sufficient to keep the dockyard busy for the next two-and-a-half years, but profits would be meager as the company had to make concessions to secure orders. Loan incentives Daewoo has received under its debt workout program also drew criticism about dumping practices from European competitors. - (Reuters)

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