Creditors roll over debts for cash-strapped Hyundai Merchant Marine

Creditors, led by the state-run Korea Development Bank, decided Tuesday to give some breathing room for cash-strapped shipping company Hyundai Merchant Marine, by rolling over debts.

A week ago, Korea’s No. 2 shipping operator sought the approval of its creditors for self-rescue measures to tide over its liquidity crunch.

“Creditors decided to give a three-month maturity extension of principal and interest starting from March 29 and to select an outside institution to normalize management,” the KDB said in a statement.

“The agreement is based on the condition that all interested parties including ship owners and nonsecured creditors share the burden together,” the bank said.

The decision comes as a relief for HMM, which has been striving to cut freight rates on chartered fleets since February amid the slowing global trade, particularly from plunging demand in China.

Although the final outcome of HMM’s negotiations with ship owners over charter rates has yet to come, the prospect for the shipping operator’s survival has somewhat brightened with the creditors’ approval.

“The decision is expected to positively affect our additional self-rescue efforts to lower charter rates and restructure debts,” an HMM official said.

The ailing shipping firm’s total debt is estimated to be around 4.8 trillion won ($4.1 billion) and some 1.2 trillion won came from nine creditors including KDB, Export-Import Bank of Korea, Industrial Bank of Korea, KB, Woori, KEB Hana and Korea Credit Guarantee Fund.

The rest came from nonsecured creditors such as Nonghyup and Credit Union, who refused to extend the maturity of 120 billion won debts due on April 7. Another 240 billion won in publicly placed bonds are due on July 7.

Oceans and Fisheries Minister Kim Young-suk told reporters in Sejong on Monday that Korea’s two shipping firms, Hanjin and HMM, should strive to survive, as the global oversupply of ships will abate by next year.

To secure much needed cash, HMM is in the process of selling its brokerage arm Hyundai Securities which could raise about 700 billion won to 1 trillion won, local reports said.

It has also put up for sale its container terminal Hyundai Pusan New-Port Terminal in the southern coastal city of Busan.

Earlier, HMM sold its bulk cargo unit Bulk Liner Division to H-Line Shipping to raise 120 billion won.

By Kim Yoon-mi (yoonmi@heraldcorp.com)