Posted on May 15, 2017
By Xiaolin Zeng, East Asia Correspondent
On the orders of South Korea’s Securities & Futures Commission, troubled Daewoo Shipbuilding & Marine Engineering (DSME) has altered its audited accounts from 2008 to the first quarter of 2016, as its figures for this period have been judged as inaccurate.
DSME’s operating profit in 2012, stated as KRW486.2 billion (USD430 million), has been corrected to KRW72 billion. The shipbuilder was reportedly in the red for four straight years from 2013 to 2016.
DSME’s 2008 net profit of KRW119.7 billion has been amended to a net loss of KRW83.2 billion. The shipbuilder’s operating loss of KRW26.3 billion for the first quarter of 2016 has been revised to a KRW154.2-billion operating profit.
The Securities & Futures Commission is a regulatory body under the Financial Services Commission. DSME’s former auditor Deloitte Anjin has been suspended from carrying out new audits for a year.
While shipbuilders worldwide have been struggling with declining ship orders, DSME has been especially hard hit because of accounting fraud allegedly perpetrated by its previous CEOs, Ko Jae-ho and Nam Sang-tae. The fraud resulted in a massive USD2.8 billion loss for 2015.
On 18 January, Ko was jailed for 10 years.
On 10 March, Nam was charged with accounting fraud and his trial is pending.
DSME was thrown a second lifeline on 18 April, after its bond holders consented to a KRW6.7 trillion second rescue package launched by the policy banks.
This aid package was conditional on DSME cutting another 1,000 jobs and implementing more intensive cost-cutting measures. Stakeholders, including bondholders, must also agree to the debt-for-equity swap plan. The bailout would involve new loans of KRW2.9 trillion to DSME, while lenders and bondholders are to agree to swap KRW2.9 trillion of debt for new shares in the shipbuilder. The bondholders also have to agree to a three-year grace period for the repayment of the remaining amount.
DSME’s employees have also been asked to take a pay cut, while the labour union has been asked to promise not to go on strike. To set an example, DSME’s CEO Jung Sung-leep has pledged to return his entire salary for 2016.
Source: Fairplay
