South Korean Government-run banks are rolling up their sleeves to sell mid-sized shipbuilders after the Export-Import Bank of Korea (Eximbank)’s successful sale of debt-saddled shipbuilder Sungdong Shipbuilding & Marine Engineering.
Eximbank is seeking potential buyers for Dae Sun Shipbuilding & Engineering, according to sources on June 8. The state-run bank has already sent teaser letters to potential buyers at home and abroad, aiming to select a stalking horse bidder in the near term to complete the sale process by the end of this year. A U.K.-based private equity firm is conducting due diligence on the shipbuilder for a stalking horse bid.
Korean Development Bank (KDB) also has put Hanjin Heavy Industries & Construction up for sale. KDB is expected to hold a preliminary bid sometime in June.
Market insiders said major state-run lenders are moving fast to unload shipbuilders after the recent successful sale of Sungdong Shipbuilding.
A consortium of Curious Partners Investment, LK Investment Partners and HSG Heavy Industries has taken over the debt-saddled South Korean shipbuilder Sungdong Shipbuilding for 200 billion won ($168 million) at the end of March. Seven bidders joined the race, indicating strong interest in the deal.
Now is the right time for state-run lenders, which have been leading restructuring programs for years, to sell shipbuilders. Market insiders’ interest in the Korean shipbuilding industry has been demonstrated after the recent Sungdong Shipbuilding sale and the industry is showing clear signs of recovery. Last year South Korea topped the list of countries to secure the most new orders with 9.43 million compensated gross tons (CGT) while the total amount of global shipbuilding orders stood at 25.29 million CGT.
But it remains to be seen whether potential buyers who expressed interest in Sungdong Shipbuilding will also be attracted to shipbuilders that have been put on standby for sale, including Dae Sun Shipbuilding and Hanjin Heavy.
STX Offshore & Shipbuilding and Daehan Shipbuilding, both of which have been under the control of KDB, have shown strong improvements in financial performance but the improvements are not enough to publicly announce the start of their sale process. Against this backdrop the sale process may come to nothing considering uncertainties stemming from the coronavirus pandemic.
A tailwind for state-run banks is that multiple foreign potential buyers are paying keen attention to the sale of domestic shipbuilders. Sungdong Shipbuilding constantly received proposals from potential foreign buyers. Dae Sun Shipbuilding also received strong interest from multiple Southeast Asian investors during Eximbank’s previous attempt to sell the shipbuilder.
Amid ongoing interests in the industry from domestic PE firms, the successful completion of the sale process of mid-sized shipbuilders largely depends on the recovery of the global shipbuilding industry. Global ship orders placed in 2019 stood at 25.29 million CGT, down 27 percent from the previous year. Global shipbuilding order value was $72.4 billion, down 8 percent from a year earlier. (Reporting by Ikhwan Choi)