Hyundai Heavy unveils $3 billion restructuring plan

JUNE 8, 2016 — South Korea’s Hyundai Heavy Industries (HHI), the world’s largest shipbuilder, today said that it will implement a management improvement plan by 2018.

Worth 3.5 trillion won (over $3 billion), the plan is designed to rebuild trust in the market, improve its balance sheet, and sharpen HHI’s competitiveness.

Under to the plan, the shipbuilding giant will secure 1.5 trillion won through the sell-off of its shares of Hyundai Motor and KCC, its stakes in Hyundai Avancis, and certain properties and receivables. It will secure another 900 billion won with an employee salary cut and work-sharing. Another 1.1 trillion won will be secured by the spin-off and sell-off of a part of its business, and the reorganization of affiliated companies. ‘

HHI is also considering a contingency plan that will secure an additional 3.6 trillion won in case of need.

Once the plan is in place, HHI expects that its liabilities-to-equity ratio will drop from the current 134% to 80% by 2018. Total debt will also be cut by about 2 trillion won to 6.6 trillion won.

HHI says that since the arrival of its current management in September 2014, it has practiced “pre-emptive and intensive” reform measures worth 3.9 trillion won. These measures include sale of corporate shares and treasury stocks, issuance of perpetual bonds, re-engineering of HHI’s portfolio to center more on its core businesses, and a restructuring of its business organization by spinning off its industrial machinery business.

On the back of these efforts, in the first quarter of 2016, HHI swung to a profit of 325.2 billion won, putting an end to a nine-quarter losing streak.

One HHI official said, “We will duly implement the plan. In doing so, we will lay a solid foundation for taking off and rebuilding trust of our clients.”