With progress being made on asset sales and creditors approving a three-month debt extension, HMM says it will now work to renegotiate ship charters as part of its ongoing “self-rescue” plan.
Hyundai Merchant Marine (HMM) issued a statement today detailing progress made in its restructuring plan that said a “firm foundation will be set to drive HMM to become a sound company” from the second half of 2016.
The Korean shipping conglomerate last Friday closed on the $100 million sale to H-Line of its dry bulk dedicated business, which transports iron ore, coal and steel products. That deal had been announced in February, but HMM said it also completed an agreement to sell a 40 percent interest plus one share in its Hyundai Pusan New Terminal to Singapore’s PSA for 80 billion won ($70 million).
HMM also said it would announce a preferred bidder for the sale of Hyundai Securities this Friday, April 1, and that payment will be completed after July 2016 once the deal is closed. It said KB Financial Group, Korea Investment Holdings and Hong Kong-based private equity fund AKTIS all submitted final bids for Hyundai Securities.
The company said it will use funds gained from the sale of the bulk business, terminal, and securities firm for “stable sustainment of its operation.”
In addition, HMM signed an agreement with the Korean Development Bank and other creditors on March 29 to restructure the firm’s debt.
“The creditor banks are planning to establish a specific debt restructuring plan for HMM after a due diligence conducted by an external accounting firm. Due to it, the banks will spare three months for preparation and postpone the principal and interest of debts under agreement,” HMM said.
“Originally, the creditor banks were planning to sign the voluntary agreement once HMM completes every stage of its restructuring plans,” it noted. “However, they decided to take the agreement forward in order to actively support HMM’s stabilization as well as accelerating the charter cut negotiations and the restructuring of debts under non-agreement.”
Despite the debt restructuring being voted down at a bondholders meeting held on March 17, HMM said it is planning to hold another meeting with all public bond holders.
“Although the overdue of public bonds due April 7 has become ineludible, the creditor banks gauge this as a part of the entire debt restructuring plan, which will have highly limited impacts on the stabilization of HMM as a whole,” the company said.
Hyundai also said it expects negotiations to reduce charter costs with shipowners and the restructuring of other debts “to speed up as the signing of voluntary agreement had drawn out a specific restructuring plan together with creditor banks.”
“Recently, HMM has made some significant progress on its first round of charter cut negotiations with foreign shipowners. HMM is going to start the second round of meetings after discussing the terms, suggested by the shipowners regarding compensations, with KDB, and is expecting that the shipowners will agree on charter reduction.”
Among the companies from which HMM charters ships is Danaos, a Greek shipowner whose shares are listed on the New York Stock Exchange. According to Danaos’s website, Hyundai provided the Greek shipowner with 28 percent of its revenues in 2015.
“Above all matters, HMM is expected to lay a foundation for profit by securing a cost structure through charter cuts to a level that HMM can endure within the current market condition,” the company said. “Also, the debt restructuring plan will make HMM improve its financial soundness noticeably.”
HMM said that by reducing its debt ratio, it will be able to satisfy “the government’s precondition for shipping finance support, so that it could strengthen its fleet competitiveness in the market. On Dec 30, 2015, the Korean government announced a $1.2 billion shipping fund to support its shipping companies with debt ratios of below 400% in the economy-related ministers’ meeting.”
