Seoul - A restructuring of South Korea's shipbuilding industry, which has been hit by a downturn in orders, is being considered by the country's government and banks, according to media reports.

Proposals are being considered that would offer troubled shipbuilders conditional financial support, reported the Yonhap news agency Tuesday, citing government officials.

A group of banks is currently reviewing a restructuring program for some of the smaller of the country's 300 shipbuilders, reported The Korea Times.

According to experts, about half of such companies are threatened with financial collapse because of problems collecting payments due, say industry experts.

Seven of the world's 10 largest shipyards are located in South Korea. Hyundai Heavy Industry is the world's largest. Almost 45 per cent of new ships delivered in 2007 came out of South Korea, according to industry data.

Numerous smaller shipyards have been erected along the nation's eastern and southern coasts in recent years, benefiting from strong demand for freighters.

But a slowing economy has disrupted the flow of orders and payments, throwing many of the smaller shipbuilders off balance. Many contracts for new ships have been cancelled or delayed.

The Korea Federation of Banks (KFB) on Tuesday presented a proposed plan for liquidity injections to the shipping industry. Instead of offering new loans or delaying payments on existing debt, the banks' plan would require companies to sell off assets to raise capital.

At that point, the KFB would review the individual business' health. Those that were not considered viable after restructuring would not receive any assistance. (dpa)