The main creditor bank of STX Group reiterated Thursday that it was still reviewing the finances of the conglomerate following a sharp fall in the shares of STX's affiliates amid speculation about financial woes at the group.
"We're currently in the process of our (annual) review of the financial structure of STX Group, but nothing has been decided yet," state-run Korea Development Bank said, repeating a statement made on Monday.
The slide in the shares of STX affiliates and Woori Finance Holdings (053000.SE), another STX creditor, on Thursday appears to have been triggered by an analyst note saying KDB would require STX to agree in June to take steps to improve its finances.
"Speculation by shipbuilding industry analysts that STX Group may have to sign a pact with KDB in June requiring it to improve its weak financial standing sparked heavy selling in those shares," a Seoul-based analyst said.
After the market close, STX Group responded to a request by the Korea Exchange to clarify on the market speculation arising from media reports about its finances. STX said it is considering selling shares of its affiliates STX Heavy Industries and STX Energy via an initial public offering or establishing a special purpose company jointly with KDB to sell its assets.
Any bank playing a main creditor role in South Korea is required to evaluate the finances of the company it has extended loans to every year to preemptively address any potential risks. If the company fails to meet certain guidelines, both sides sign an agreement to improve the debtor's financial standing, which can include asset sales.
STX Group, whose main businesses include shipbuilding, shipping and heavy machinery, was established in 2001 and has become one of South Korea's biggest conglomerates through mergers and acquisitions, requiring frequent borrowing.
A STX Group spokesman said its talks with KDB have been going smoothly and it has been seeking ways to make its finances healthier.
Shares in STX Corp. (011810.SE) ended down 11.4% at KRW9,830, STX Offshore & Shipbuilding (067250.SE) fell 11.8% to KRW10,500 and STX Pan Ocean (028670.SE) was down by the 15% daily limit at KRW4,400. Woori Finance closed down 7.1% at KRW10,550.
Korea Development Bank and Woori Bank, the main banking unit of Woori Finance, declined to disclose their exposure to the Korean conglomerate, while STX Group declined to comment on its financing details.
Market analysts estimate that Korea Development Bank has KRW2.8 trillion ($2.4 billion) of total exposure to STX, Woori Bank KRW1.233 billion, and Hana Bank and Korea Exchange Bank a combined KRW663 billion.
Source: Dow Jones