Samsung Heavy Industries to raise $985mn via rights issue

SEOUL: South Korea's Samsung Heavy Industries Co Ltd said on Friday its board of directors have approved a plan to raise about 1.1 trillion won ($985.22 million) via a rights issue as the shipbuilder struggles to cope with a prolonged downturn.

Samsung Heavy, part of the Samsung Group conglomerate, has been planning to sell share as it copes with deep losses stemming from a drop in orders for new vessels. The government expects a 20 percent drop in major shipbuilders' capacity by 2018 from 2015.

The company said in a regulatory filing it plans to issue 159.1 million new shares at 6,920 won each, a 30 percent discount to Thursday's closing price of 9,890 won, with the new shares to be listed on Nov. 28.

"We decided to pursue a rights issue in order to respond proactively to uncertain market conditions and secure funding for the company's operations in a stable manner," Samsung Heavy Chief Executive Park Dae-young said in a separate statement.

Samsung Heavy, Hyundai Heavy Industries Co Ltd and Daewoo Shipbuilding & Marine Engineering Co Ltd - the world's biggest shipbuilders by orders, and all based in South Korea - this year announced plans to sell up to 4.8 trillion won in combined assets and find 3.6 trillion won through cost cuts.

Samsung Heavy reported a 277.6 billion won ($248.37 million) operating loss in the April-June quarter. It booked a first-quarter operating profit of 6.1 billion won and a 1.5 trillion won operating loss for all of 2015.

Separately, a person with direct knowledge of the matter told Reuters that Samsung Electronics Co Ltd Vice Chairman Jay Y. Lee - the de facto head of Samsung Group - does not plan to buy any of the new Samsung Heavy shares.

Lee had previously pledged to support a 1.2 trillion won rights issue by Samsung Engineering Co Ltd by buying up to 300 billion won worth of the firm's shares should the offering not be fully subscribed by shareholders, leading to speculation he may do the same for Samsung Heavy's offering.

A Samsung Group spokeswoman declined to comment.