Posted on August 30, 2016
By Costas Paris and In-Soo Nam, The Wall Street Journal
STX Offshore & Shipbuilding Co. said Friday it will lay off about a third of its workforce and sell a yard in France, as the Korean shipbuilder aims to stay above water by restructuring.
STX, which filed for receivership in May, is the country’s fourth largest shipyard. It is a unit of conglomerate STX Corp., which is active in shipping, construction and energy around the world.
The shipbuilder told a bankruptcy court in Korea that it has hired PricewaterhouseCoopers to help it sell STX France, a profitable yard in France specializing in building cruise ships. STX said it plans to cut its 2,090 staff in Korea by 35% by the end of September.
Court officials said STX’s creditors will decide in October whether to accept the restructuring plan. If the plan is rejected, the company would be liquidated.
Korean shipyards, including the world’s three largest— Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co.—are under sweeping restructurings led by creditor banks that have struggled to rehabilitate the embattled shipbuilders through the sale of noncore assets.
Profits at Korean shipbuilders began sliding after the 2008 global economic crisis damped orders from shipping companies and as lower-cost Chinese rivals made market inroads.
A global glut of ships in the water and not enough cargo to fill them over the past three years has led to record low freight rates, prompting owners to further cut or push back new ship orders.
The Korean yards ventured into offshore oil rigs starting around 2010 to minimize direct competition with shipbuilding rivals in China, where inexpensive labor could churn out low-profit vessels at cheaper rates.
However, a sharp decline in crude prices has prompted international oil companies to reduce capital expenditure, resulting in fewer offshore and other projects for shipbuilders.
STX Offshore creditors have injected billions of dollars to bail it out, but it still ran an operating loss of 314 billion Korean won ($265 million) last year, following a loss of 1.5 trillion won in 2014. The company owes financial institutions nearly 6 trillion won.
The French shipyard is the only STX Offshore unit with a healthy order-book for at least seven years. Daewoo Shipbuilding has been looking to buy the yard, but people with knowledge of the matter said it pulled back due to its own financial problems. German yard Meyer Werft GmbH, which has acquired STX Offshore’s facilities in Finland, is a potential buyer, those people said.
Source: The Wall Street Journal
