South Korean ocean carrier Hyundai Merchant Marine signed a charter rate negotiation agreement with five containership owners for a charter rate reduction of about 20 percent.
South Korean ocean carrier Hyundai Merchant Marine (HMM) signed a charter rate negotiation agreement with five containership owners.
HMM said the cash outlay for containership charter rates will be reduced by about 20 percent and that it has also reached an agreement with bulk carrier owners for a 25 percent charter rate reduction.
The ocean carrier plans to complete all contracts with every ship owner within June.
In exchange, HMM said it will pay about 530 billion South Korean won (U.S. $455 million) of the full charter amount of 2.5 trillion won for the next three and a half years with newly issued shares and long-term bonds.
HMM said reducing the cash outlay and paying the shipowners with stock and long term bonds will improve its liquidity.
Korea’s Yonhap news agency reported the reduction rate fell short of the goal of 28.4 percent, but that other creditors have accepted the agreement.
HMM noted the negotiations with shipowners has been going on since February and that all of the restructuring measures it announced it would undertake then have been completed.
“The foundation of the company’s stable operation is to be restored with improved liquidity status,” the company said.
“Following the sale of Hyundai Securities, HMM’s debt ratio has dropped to 700 percent, and it will decline further down to below 400 percent level once the charter negotiation and debt-equity swap process completes,” HMM said. “This fulfills necessary requirements to use shipping fund supported by the government, which will be a major boost to strengthen the competitiveness of HMM through mega size∙high efficiency container ship orders as well.”
Hyundai also said it is “one step closer to becoming a member of THE Alliance, a vessel sharing alliance that is slated to go into effect next spring between six carriers: Hapag-Lloyd, NYK, MOL, “K” Line, Yang Ming and Hanjin. If a merger or other business deal between Hapag-Lloyd and United Arab Shipping Co. is realized, it is expected UASC will also become a member of the THE Alliance.
Earlier this week, South Korea’s Financial Services Commission (FSC) announced a massive program for restructuring both South Korea’s shipping and shipbuilding industry, in which it noted HMM had gained approval from bondholders for a proposed debt restructuring. The government said it would support HMM’s plan to join THE Alliance.
“Hanjin is now undergoing negotiations with 22 shipowners on charter rates and planning to meet with bond holders to restructure its debt,” the FSC said. “Hanjin is required to make its self-rescue efforts to secure liquidity as HMM did, while the government keeps supporting the company get back on track.”
All three of Korea’s “Big Three” shipbuilders – Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering – have prepared self-rescue plans in case of further slumps and economic downturn.
HMM strikes charter rate deal with containership owners
