The shipping unit of South Korea's troubled STX shipbuilding group filed for court receivership Friday owing to mounting debts and losses caused by a global economic slump.
The move came after the state-run Korea Development Bank (KDB) said it would not use its its private equity fund to buy STX Pan Ocean, one of the country's three largest bulk carriers.
STX Corp., the group's holding company, has a 27.4 percent stake in STX Pan Ocean, while KDB controls 14.99 percent. The shipper's total debt is estimated at around 4.4 trillion won ($3.9 billion).
The STX group, which has 11 subsidiaries, has been reeling under mounting debt after being hit by a global downturn in the shipbuilding and shipping sectors.
More than one trillion won in corporate debt matures this year, including 500 billion won in May alone.
Creditors have already provided 600 billion won to the group's shipbuilding unit, STX Offshore and Shipbuilding, to help it repay maturing bonds and operate normally.
But the group wants a massive liquidity injection for other subsidiaries to avert bankruptcy in exchange for a voluntary restructuring.
Last month creditors pumped 900 billion won into STX Corp and STX Offshore and Shipbuilding. But they have yet to agree on loans for STX Heavy Industries and STX Engine.
"We will go ahead with the injection of liquidity into other units whose financial pinch may get worse due to the court receivership," KDB executive director Ryu Heui-Kyoung told reporters.
The STX group pledged late last year to raise 2.5 trillion won by selling domestic and overseas assets, and has since raised 1.13 trillion won. But details of the sale of its European assets have not been disclosed.
These include shipbuilders STX Finland and STX France, which is two-thirds owned by STX Europe, a subsidiary of STX Shipbuilding. The other third of STX France is owned by the French state.
STX France operates two shipyards, one in Saint-Nazaire and the one in Lorient, while the Finnish operations include three shipyards in Turku, Rauma and Helsinki.
In December the Saint-Nazaire yard -- which has struggled to secure major new orders in recent years -- won a lifeline with a billion-euro deal to build a luxury liner for Miami-based Royal Caribbean International.
The yard employs 2,100 people and provides work for another 4,000 subcontractors.