News Column

STX Heavy Industries told to repay its Chinese unit's debts

January 23, 2014

STX Heavy Industries Co. , a troubled South Korean shipbuilder, said Thursday it would seek countermeasures to an order by China's arbitration commission to repay 60.9 billion won ( US$56.8 million ) in debts held by its unit. The shipbuilder issued a loan guarantee in October 2010 on a loan by its Chinese heavy machinery maker, STX Dalian Heavy Industries Co. , from China's Bank of Communications . Last August, the Chinese bank filed a petition with the China International Economic and Trade Arbitration Commission for repayment from STX Heavy Industries after the Chinese unit failed to service the principle and interest. The South Korean shipbuilder said it was notified by the commission Wednesday to pay back the loans. "We will take active countermeasures (against the Chinese bank's petition) according to the arbitration procedure," the company said in a regulatory filing. "The debt isn't due for up to another 17 years, but the Chinese bank told us to repay the debts as our cash-strapped Chinese unit failed to pay the principle and interest on the debts," said Kim Yong-hyun, an official at STX Heavy Industries . "No matter what decision the Chinese arbitration commission makes, it is subject to approval by ( South Korea's ) local court before we follow the decision." Unlisted STX Dalian Heavy Industries is a wholly owned subsidiary of STX Heavy Industries . STX Group , once the country's 13th-biggest conglomerate, is struggling to deal with a liquidity shortage and mounting debts of its major affiliates from a downturn in the shipbuilding and shipping sectors. The group's holding company STX Corp. and its three ailing subsidiaries -- STX Offshore & Shipbuilding , STX Heavy Industries and STX Engine -- have been under a self-rescue plan to get back on their feet.

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Source: Legal Monitor Worldwide

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