Financially troubled Hyundai Merchant Marine Co. may face more challenges even after the country's No. 2 shipper successfully completes its drawn-out negotiations with owners of chartered ships to cut their leasing rates, industry sources said Tuesday.
This week, the shipping line has to wrap up its months-long negotiations to lower its charter rates by 28 percent on average, one of the prerequisites that its creditors, led by state-run Korea Development Bank, have demanded in return for thorough restructuring and additional aid.
Higher charter rates, the creditors and the government believe, are worsening the shipper's financial health, and a cut in the leasing rates is one of the key preconditions for the survival of the shipper.
Hyundai Merchant paid a total of 1.9 trillion won ($1.6 billion) to 22 owners of chartered ships, which account for 32 percent of its annual sales of 5.8 trillion won.
Last week, Hyundai Merchant and its chartered shipowners failed to reach a deal over the rate cut, but the government and the creditors stress the talks are still under way.
The creditors have warned that Hyundai Merchant will be put under court receivership if it fails to produce "meaningful results" from the negotiations.
Even after the deal is successfully completed, the shipper, however, is faced with a few more hurdles to cross -- a debt recast and inclusion into a global shipping alliance.
Later in the day, a proposal to swap 700 billion won worth of loans into the shipper's stocks is set to be put up for a vote by its creditors.
The vote came one week after its bondholders rejected a proposal to extend the maturity of 120 billion won worth of debt.
Hyundai Merchant plans to hold another round of bondholder meetings later this month to extend maturing debts worth 800 billion won.
Also, Hyundai Merchant should join a global shipping alliance to survive after its charter rates are cut and its debt is recast.
Global shipping lines are in a rush to form bigger and more powerful alliances to stay afloat. Hyundai Merchant may be excluded from joining a group of shipping lines unless it cuts its charter rates and reschedules its debt.
Hyundai Merchant claims that its inclusion into a global shipping alliance will be guaranteed if it successfully completes talks over the charter rate cuts and its debt recast is approved by its creditors and bondholders. (Yonhap)
