STX makes last-ditch efforts for survival

STX headquarters in central Seoul

Chairman Kang

plans to offload

overseas assets

Kang Duk-soo STX Group Chairman

By Kim Yoo-chul

STX Group Chairman Kang Duk-soo is facing his biggest-ever crisis as the nation’s 13th largest conglomerate by assets is teetering on the brink of collapse due to an acute cash shortage caused by a prolonged downturn in the shipbuilding industry.

In a last-ditch effort to save the group, the 63-year-old has decided to offload all of its overseas assets to address cash flow problems. Also, he decided to hand over his controlling stakes in STX Offshore & Shipbuilding, a key affiliate of the group.

"We will keep our three crucial affiliates ― STX Heavy, STX Engine and STX Offshore. The group plans to sell its shares in its overseas affiliates including our shipyards in France, Finland and Dalian in China,’’ said a spokesman for the group, Tuesday.

The official said the restructuring was aimed at realigning its businesses to save the group by focusing on its main businesses.

Kang’s decision to walk away from the Dalian shipbuilding venture shows the group’s sense of urgency as the shipyard was one of its crucial overseas assets.

The spokesman said that Dalian local government has dispatched an auditing team to value the facility.

Since 2007, STX has invested over $1.5 billion in the shipyard, the world’s largest in terms of shipbuilding capacity. Some 21,000 worked there during its peak period of operations.

"There is no option but to sell the shipyard, and STX hopes to raise as much as 1 trillion won. This is a scenario that we hadn’t been expecting,’’ an STX official identified by his surname Choi told The Korea Times.

Choi said that the Dalian city government is seeking to have the China State Shipbuilding Corp (CSSC) manage the shipyard until a new owner is found.

STX failed to meet a repayment schedule for bank loans amounting to some $647 million.

Despite STX Dalian’s huge liabilities, the local government is willing to take control of the facility due to its large Chinese workforce and because the loans are from local banks.

Kang’s fate up in the air

Kang, the salaried employee-turned-group chairman, has seen remarkable success over the last decade, turning the group into one of the top conglomerates through a series of successful mergers and acquisitions.

He was regarded as the most admired businessman among salaried workers here as he took over a failing ship-engine maker, Ssangyong Heavy Industries, and turned it into a conglomerate with $23 billion in assets in just 11 years.

But his group was hit hard by the 2008 global financial crisis and it has since been suffering from reduced demand for marine transportation and even the cancellation of some shipbuilding orders.

STX was struggling to repay maturing debts amid the bearish market and the chairman had been seeking to acquire Hynix Semiconductor _ now SK hynix _ to find new business momentum. The plan drew much criticism from the financial market and STX scrapped the idea.

Kang handed over his stakes in STX Offshore to creditors, and banking sources said the chairman will drop his management rights to save the conglomerate. ``STX Pan Ocean will be separated and its construction unit will also part from the STX Group,’’ said a local banking source.

"This is a pity for Chairman Kang. He was too ambitious, but we don’t expect the group is going to see a complete collapse. STX will be reorganized with a few key businesses,’’ said Kim Il-tae, a senior fund manager at Taurus Investment in Seoul. Kim said he advised his clients to buy more STX Group-related stocks.

Korea Development Bank’s private equity team is reviewing the possible acquisition of STX Pan Ocean ― the nation’s top bulk carrier ― following the group’s request.

Last year, STX said it will raise 2.5 trillion won by selling assets. It has so far raised 1.13 trillion won, according to Kim.