SEOUL (Reuters) - South Korea’s central bank governor said on Thursday the fresh bailout plan for Daewoo Shipbuilding & Marine Engineering Co Ltd (042660.KS) was “inevitable” when considering the consequences of letting the company go under.
“There are many varying opinions, but when we look at the economic loss that could occur as a result of the company going bankrupt, there is an element of inevitability to the (bailout plan),” Bank of Korea Governor Lee Ju-yeol told journalists at the central bank headquarters in Seoul.
“We will be looking at this from here on out, but whether the creditors will agree to change the debt and what Daewoo does to save itself will be very important.”
South Korean state banks are preparing a fresh $2.6 billion bailout for floundering Daewoo, which has built up huge losses from offshore projects and risks missing debt repayments.
Without the infusion of funds, Daewoo is not expected to be able to redeem 940 billion won ($840.49 million) in corporate bonds maturing this year - starting with 440 billion won due in April, the Financial Services Commission said on Thursday.
Bondholders and other creditors, however, will have to agree to painful debt-for-equity swaps for the 2.9 trillion won bailout to go through.
Reporting by Christine Kim; Editing by Stephen Coates