Reborn from the ashes! STX Shipbuilding completes sale and officially changes its name

After eight years of debt restructuring, the once-giant shipbuilding company, STX Shipbuilding in South Korea, has finally been reborn, changing its name and starting anew.

STX Shipbuilding officially changes its name after completing all sale procedures.

On July 27, through a speech to employees, Jang Yun-geun, the representative director of STX Shipbuilding Ocean, announced the end of the joint management agreement (self-discipline pact) with the creditor group. This also marks the completion of all procedures for the sale of STX Shipbuilding Ocean, and the company's name has officially been changed to "K Shipbuilding".

On January 27 this year, STX Shipbuilding Ocean signed an asset sale contract worth 250 billion won (approximately US\$224 million) with a consortium consisting of United Asset Management Company (UAMCO), South Korea's largest non-performing debt clearing agency, and KH Investment (KHI), a South Korean private equity fund.

At the extraordinary shareholders' meeting of STX Shipbuilding Ocean held at the end of April this year, a resolution was made to change the company's name upon completion of the asset sale procedures, and the name change was completed on July 26.

With the completion of this sale, the joint management agreement between STX Shipbuilding and the creditor group has ended, and the company's largest shareholder has changed from the creditor group to the KHI-UAMCO alliance. Currently, the KHI-UAMCO alliance holds 95% of the company's shares. Among them, strategic investor (SI) KHI holds 47.5% of the shares, and financial investor (FI) UAMCO's special purpose entity (SPC) K-SUNSHINE Holdings holds 47.5% of the shares.

In his speech, Jang Yun-geun expressed his determination to lead the company into a new beginning. He said: "Thanks to the years of hard work by all employees, the joint management agreement with the creditor group has finally ended. Now, we hope to eliminate the dark atmosphere of the past. Like the semiconductor, automobile, and steel industries, the shipbuilding industry we are engaged in has been a representative export industry of South Korea for decades, and even today, it still accounts for more than 10% of South Korea's total exports."

Jang Yun-geun said: "As employees of the new K Shipbuilding, if everyone can help each other, care for each other, and cultivate their own competitiveness, then the company and everyone's sense of honor and pride will naturally increase."

Jang Yun-geun also emphasized the current difficulties faced by the company, such as the sharp rise in the price of ship plates and the continued COVID-19 pandemic. He said: "The recent improvement in the shipbuilding industry seems to have brought a good opportunity for the company to receive new ship orders, but a closer look reveals that the soaring price of thick plates has led to rising costs, and the continued pandemic makes the internal and external environment still unfavorable. To overcome the difficulties we face, the company must fully seize the current opportunities, take on more orders, and achieve higher production targets. To this end, everyone, including myself, should be prepared for a new mindset."

After its "rebirth," K Shipbuilding plans to expand its order intake based on its main ship types, such as small and medium-sized oil tankers and gas carriers, and accelerate the normalization of its operations. To this end, K Shipbuilding has carried out large-scale organizational restructuring and senior management personnel adjustments, reorganizing the company into 5 departments, 3 headquarters, and 7 offices, and appointing a team of 19 senior executives, including 1 vice president, 1 executive managing director, 4 managing directors, and 13 directors.

K Shipbuilding stated: "The biggest feature of this organizational restructuring and senior management personnel adjustment is that it puts production and design at the forefront, emphasizing on-site management; reusing experienced senior executives, and promoting capable personnel to prepare for the future of K Shipbuilding and consolidate the stability of its operations."

Once the world's fourth-largest shipbuilding company, it underwent eight years of debt restructuring.

It is reported that STX Shipbuilding was once the world's fourth-largest shipbuilding company and one of the four giants in South Korea's shipbuilding industry. However, after the outbreak of the 2008 global financial crisis, STX Shipbuilding experienced numerous difficulties due to the prolonged downturn in the global shipbuilding industry, resulting in tight cash flow and overexpansion of its business.

Starting in 2013, STX Shipbuilding underwent debt restructuring and entered a creditor group management model. The company's creditor group consisted of the Korea Development Bank (KDB), the Export-Import Bank of Korea (KEXIM), Nonghyup Bank (NH Bank), and Woori Bank, with a total shareholding of 79.44%. Among them, the Korea Development Bank held 35.26%, the Export-Import Bank of Korea held 19.66%, Nonghyup Bank held 16.53%, and Woori Bank held 7.99%.

In 2014, STX Shipbuilding was forced to delist. In 2016, because years of financial aid failed to improve the business prospects of STX Shipbuilding, creditors decided to end STX Shipbuilding's self-rescue plan and abandoned providing additional funds. STX Shipbuilding entered court receivership in May of the same year.

In order to overcome its difficulties, STX Shipbuilding launched a global "auction" in 2016, selling STX Shipbuilding and its subsidiaries, South Korea's Goseong Offshore & Shipbuilding and STX France. The bankrupt Chinese subsidiary, STX Dalian, also reappeared at the auction.

STX France (now Chantiers de l’Atlantique)

In September 2017, the French government decided to temporarily nationalize STX France, with the French government and the French Naval Group holding its shares. In October of the same year, STX Shipbuilding officially changed its name back to "Chantiers de l’Atlantique," the name of STX France before it was acquired by STX Shipbuilding.

Also in 2017, South Korean shipbuilder Samkang M&T, together with UAMCO, acquired Goseong Offshore & Shipbuilding. Samkang itself is a new shipyard in South Korea that has transformed from a block manufacturer to a shipbuilder, while Goseong is a medium-sized manufacturer of container ships and ship components.

With the recovery of the shipping market, STX Shipbuilding received multiple orders in 2017. In July of the same year, the Seoul Central District Court announced the early termination of the court receivership proceedings against STX Shipbuilding, making STX Shipbuilding a normal company that could participate in marketing and order taking. However, creditors were not optimistic about STX Shipbuilding's future.

At that time, the Korea Development Bank believed that STX Shipbuilding's operating costs far exceeded those of other companies in the industry, severely limiting the profits generated by new contracts. STX Shipbuilding's indirect costs were too high, and only by reducing the number of regular employees from about 1,430 to 700 and annual production capacity from 30-35 ships to 15-20 could cost competitiveness be ensured.

In March 2018, the South Korean government announced a plan to handle STX Shipbuilding, requiring a 40% reduction in its workforce and a focus on building small oil tankers and LPG carriers. Due to union opposition, STX Shipbuilding later revised its self-rescue restructuring plan, deciding to reduce costs through salary cuts and rotating unpaid leave instead of layoffs. This self-rescue plan was approved by creditors, thus preventing STX Shipbuilding from facing bankruptcy again.

In the restructuring led by the creditor consortium, STX Shipbuilding, in order to survive independently without new financial support, continuously implemented intensive self-rescue plans such as selling non-core assets, layoffs, unpaid leave, and voluntary retirement, but it has never truly escaped its difficulties.

Starting in 2018, STX Shipbuilding implemented rotating unpaid leave in 6-month cycles. In 2020, due to a sluggish ship market in the first half of the year with zero orders received, STX Shipbuilding implemented a voluntary retirement program for all employees. Just when its survival was in jeopardy, STX Shipbuilding's order intake showed signs of recovery. In August 2020, it received orders for three small oil tankers from a South Korean ship owner, finally ending an eight-month "order drought".

In November 2020, with improved performance, STX Shipbuilding restarted the sale process. A consortium of UAMCO and KH Investment was selected as the preferred bidder and reached a preliminary agreement with STX Shipbuilding's creditors. In January of this year, an asset sale contract worth 250 billion won (approximately US\$224 million) was officially signed, and STX Shipbuilding, which had been mired in a financial crisis for many years, finally found a "new owner".