By Joyce Lee and Cynthia Kim

By Joyce Lee and Cynthia Kim

 

SEOUL (Reuters) - South Korea said on Monday it plans to establish a state-backed ship financing company with an initial capital of 1 trillion won ($871.73 million) to help improve the financial health of Korean shipping companies.

 

The government would provide financing of 6.5 trillion won ($5.67 billion) in total so that local shipping firms could acquire new vessels, said a government statement.

 

The measures were announced to support struggling local shipbuilding and shipping industries following the collapse of Hanjin Shipping Co Ltd <117930.KS>, which applied for court receivership in August.

 

Daewoo Shipbuilding & Marine Engineering Co Ltd <042660.KS>, one of the world's three largest shipyards, all in South Korea, is currently suffering from a big drop in orders.

 

The trade ministry said Daewoo's main creditor, state-backed Korea Development Bank (KDB), would take into consideration any future improvement in Daewoo's operations and market conditions before potentially pursuing a sale or some other form of merger or acquisition of Daewoo.

As of now, there is no plan to sell Daewoo, a high-ranking financial regulator clarified in a press briefing on Monday.

New vessel orders won by South Korean shipbuilders between January-September fell by 87 percent compared to the same period in the previous year, steeper than a 72 percent drop in global orders, the trade ministry said.

The steeper drop in orders was partly due to a fall in domestic orders compared with competitors in Japan and China, a high-ranking trade ministry official told reporters.

($1 = 1,147.1500 won)

(Reporting by Cynthia Kim and Joyce Lee; Editing by Sam Holmes)