Dongbu Steel seen closer to stock market delisting

Dongbu Steel is thought to be heading toward a delisting from Korea’s main stock exchange, as the debt-saddled steelmaker’s prospects of escaping from a prolonged state of capital erosion grow increasingly dim.

Shares in Dongbu plunged by the daily limit of 30 percent to 2,500 won on the main KOSPI bourse Monday on news that the ongoing efforts by creditors to sell control of the firm is likely to fail due to apparent lack of bidders. 

Dongbu Group headquarters in southern Seoul (Yonhap)

The sale, which creditors pushed as part of its debt workout program for the firm, was delayed once in January, as it drew no interest from potential buyers amid global industry woes.

Steel companies are fighting for survival in the face of a global supply glut, with no turnaround expected in near future as demand from China and emerging economies cools.

Dongbu Steel, a unit of Dongbu Group, will be delisted if it fails to boost its equity capital, through the planned sale or by other means, before the scheduled report of the annual audit at the end of March.

According to its financial statement at the end of September 2015, the company’s debt-to-equity ratio rose to 4,783 percent in 2014 from 295 percent in 2013 and its capital stock was entirely wiped out by liabilities last year.

By law, companies in full-scale capital erosion face immediate exit from the exchange.

“Additional capital injection from creditors is unlikely, because there is no confidence that the company’s conditions will improve in the future,” Yonhap News quoted a source from the creditor side as saying. 

By Lee Sun-young

(milaya@heraldcorp.com)

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