By Joyce Lee
SEOUL (Reuters) - South Korea's Daewoo Shipbuilding & Marine Engineering Co Ltd <042660.KS> has won near unanimous agreement from bondholders to swap their debt for equity, meeting a condition that unlocks a $2.6 billion bank bailout for the world's biggest shipbuilder.
Daewoo won approval from over 96 percent of bondholders at two meetings on Tuesday and three on Monday, with attendance exceeding 78 percent. The meetings came shortly after the shipbuilder won the approval of its biggest bondholder, the National Pension Service.
"We will normalize the company as soon as possible through bone-grinding effort, so you (bondholders) can come to think you made a good choice for yourselves, the company and the economy," Chief Executive Officer Jung Sung-leep said in a statement.
The shipbuilder has been pushed to the brink by the impact of historically low oil prices, which caused delays in payments for complex offshore facilities. At risk is an estimated 50,000 jobs and an economic hit of tens of billions of dollars.
But with bondholders accepting a debt-to-equity swap, Korea Development Bank (KDB) [KDB.UL] and Export-Import Bank of Korea (KEXIM) [KEXIM.UL] will supply up to 2.9 trillion won from late April or early May after court approval, a KDB official said.
The bailout plus a 4.2 trillion won bailout starting in late 2015 amounts to South Korea's biggest state-backed rescue of a single company in over a decade, state bank officials said.
The new cash will help Daewoo meet its need for about 471 billion won in operating funds by the end of April, and allow commercial banks to resume issuing ship owners refund guarantees on orders Daewoo wins, without which contracts are voided.
Daewoo can also continue building the 108 ships ordered as of February for on-time delivery.
Delivery dates of nearly all existing orders - and payments for delivery - are either this year or next, a Daewoo spokesman told Reuters.
Daewoo's existing orders amount to the most in the world at 6.2 million compensated gross tonnage (CGT), 70 percent or more over compatriots Samsung (KS:005930) Heavy Industries Co Ltd (KS:010140) and Hyundai Heavy Industries Co Ltd (KS:009540), Clarksons Research data showed.
But the shipbuilder aims to become more sustainable by cutting annual revenue to about 7 trillion won by 2018 from 12.7 trillion won last year, CEO Jung previously said.
After shrinking, the government intends to sell its stake in Daewoo and consolidate the biggest three domestic shipbuilders into two, the Financial Services Commission and KDB have said.
Daewoo will also continue with a planned 5.3 trillion won in asset sales and cost-cutting, ongoing since late 2015, by selling a construction subsidiary, a shipyard in Romania and three other units. So far, Daewoo has met a third of its goal.
Last week, it said about 98 percent of employees and executives had agreed to a pay cut. The shipbuilder aims to cut labor costs by about 25 percent this year to 640 billion won, almost half the figure of two years earlier.