SEOUL, KOREA - Korea Development Bank will acquire STX Pan Ocean, a shipping company under the umbrella of STX Group. According to investment banking sources on May 28, the state-run Korea Development Bank is currently contacting financial regulators for final approval. Even after a capital reduction and a debt-to-equity swap, the bank will have to inject at least 2 trillion won to the ailing shipping company.
Earlier, the bank had suggested to financial regulators a proposal to take it over after a period of workout, for which the regulators didn't accept. In consideration of repercussions on the corporate bond market, the regulators persuaded Korea Development Bank to acquire STX Pan Ocean outright without going through a workout process.
As of the end of April this year, the debt of STX Pan Ocean owed to banks is 4.4 trillion won, which means that Korea Development Bank must assume at least 3.7 trillion won except the 700 billion won that can be reduced through voluntary pacts with creditor banks. Even if the company could successfully postpone redemption of the bonds coming due, Korea Development Bank will have to pour at least 2 trillion won to revive the company that has little ability to pay back the bonds and bank loans on its own.
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