Overhaul underway

Cash-strapped affiliates of a leading South Korean shipbuilding conglomerate appear to have cleared a major hurdle in the race to avoid liquidation.

Six subsidiaries of STX Dalian Shipbuilding (STX Dalian) on Thursday received formal approval to proceed with the next phase of a restructuring in China, sources say.

According to the Xinhua News Agency and other reputable Asian media outlets the ruling was issued by Dalian Intermediate People's Court.

Citing an announcement released earlier in the day the state-backed publication says officials overseeing the case are asking creditors to submit claims prior to 26 September.

It also pointed out that debtors and creditors are scheduled to meet face-to-face in early October but it’s not clear what topics will be addressed at that time.

As we reported affiliates of STX Dalian filed applications to enter receivership last month and secured tentative approval not long after the initial request was submitted.

Some claim the debtors approached the court with a restructuring plan in hand but this could not be immediately confirmed at the time of writing Thursday.

It is widely believed that the anaemic companies will be given a year to cure their financial maladies in a process a leading US bankruptcy lawyer likened to Chapter 11.

If the campaign fails to bear fruit the court overseeing the cases will likely force the petitioners to liquidate their assets, a fate some forecasters continue see as a likely scenario.

While STX Dalian is among the largest foreign-funded shipbuilders in China and boasts ties to STX Group’s network of yards observers claim it has been relatively inactive for some time.

The current status of the company’s newbuilding backlog is also unclear but a number of owners that placed orders prior to its collapse have taken legal action, which is why few were surprised when they first learned about the request to enter receivership.

According to the Clarksons Shipping Intelligence Network database the list of outstanding projects penned in 2012 and 2013 includes contracts for bulkers, tankers and containerships inked by the likes of the Fredriksen Group, Wilmar Holdings and Zodiac Maritime.

Late last month a leading industry lender, Danish Ship Finance, noted that the shipbuilding segment in the midst of a consolidation process whereby inefficient yards are shuttering capacity in response to renewed concerns that demand will slide in the years ahead.