Samho Heavy Industries suffering from lower government aid and creditors

Samho Heavy Industries (SHI) located in the Youngam industrial complex, South Cholla province, has been suffering from poor government aid and creditors, although it is trying hard to improve its management.

Although SHI had launched its business with the debts of Halla Shipbuilding, it encountered severe difficulties from a lack of backup in several terms such as, DES (Debt-Equity Swap) ratio, maturity interest, and payment periods, compared with Daewoo Shipyard said an SHI-affiliated company council member. During the restructuring process after the currency crisis, credit banks allowed Daewoo Shipyard a 1.17 trillion won DES. On the other hand, SHI secured only a 100 billion won DES, leaving them with a debt ratio of 1,200 percent, 10 times as much as Daewoo's.

Further, redemption conditions drove SHI to repay 750 billion won in debts in a short period, having to repay debts in 4 years with a three-year grace period, while Daewoo received 20 years to repay debts, with a three-year grace period.

High interest rates (9.75 percent) also applied to SHI, higher than Daewoo's 8.5 percent.

SHI's high debt ratio dealt the fatal blow for its receiving overseas shipbuilding orders, and hence, its lack of working funds.