Bondholders OK HMM’s debt restructuring plan

Bondholders of Hyundai Merchant Marine have approved a debt restructuring proposal by the ailing shipper, clearing one of the major hurdles of its rehabilitation program.

During three separate meetings Tuesday, bondholders gave the nod to HMM’s proposal on some 630 billion won ($529 million) debt to unanimously swap more than half of it for the shipper’s stocks. The remaining amount will be paid back after two years.

“Above all, avoiding a court receivership is more favorable for us to collect our debts,” a bondholder said.

The country’s second-largest container transporter will hold meetings through Wednesday, to get approval from bondholders to extend the maturity of debts, totaling some 800 billion won.

Of the outstanding debt, institutional investors, including the state-run Korea Development Bank and the National Credit Union Federation of Korea, account for 75 percent of the total borrowings.

In March, creditors of the company had agreed to a 680 billion won debt-for-equity swap with conditions attached.

The debt recast is one of the key prerequisites for the shipper to be put under a creditor-led rehabilitation scheme along with lowering charter fees and inclusion in a global shipping alliance.

HMM is in final talks with the owners of its chartered ships to cut leasing rates, whose outcome may be decided later this week.

The cash-strapped company paid a total of 1.9 trillion won, accounting for more than 30 percent of its sales last year, to 22 ship owners. Eighty-five of the 124 ships HMM operates are taken on lease.

According to sources, the company expressed a sanguine view on the negotiations with key fleet owners over the charter fees and joining a new global alliance during the meeting.

On June 2, the carrier will push to be a part of a newly formed ocean carrier consortium dubbed THE Alliance during a gathering of the G6 Alliance members to be held in Seoul.

HMM is a member of the G6 Alliance which will cease to exist next year as global shipping lines are regrouping to compete more effectively against market leaders.

Shares of HMM closed up 13.56 percent to 18,000 won, following a four-day rally on the bondholders’ approval and expectations that the firm would strike a deal with ship owners soon.

HMM and other local shipping lines have been grappling with a glut of ships and the subsequent fall in freight rates.

By Park Han-na (hnpark@heraldcorp.com)