Hyundai Merchant Secures Debt-for-Equity Swap

Debt-laden Hyundai Merchant Marine has secured a $570 million debt to equity swap with its creditors, Korea Development Bank announced early Monday. The exchange represents about 13 percent of the total the carrier owes. Participating creditors have not yet finalized what portion of HMM they will receive in exchange for the swap, KDB said.

HMM will have to join a major shipping alliance in order to satisfy its part of the agreement (previous accounts have suggested THE Alliance).

HMM continues its efforts to renegotiate charter rate reductions with its shipowners. Regulators have demanded that it achieve average reductions of 28 percent, and that all affected owners participate. Multi-party talks reached an initial deadline without resolution on Friday; HMM has until May 30 to reach a satisfactory arrangement with its counterparties in order to avoid court receivership.

“The current crisis has been the result of partly the global downturn and also of fragile management of Korean [carriers],” said IMO Secretary General Kitack Lim, speaking to Korea's Joongang Daily. “Korean [carriers] and shipbuilders seem like they don’t have mid-and-long-term contingency plans . . .  to protect themselves from such cyclical changes in the market conditions in the long run.” 

An analyst with the government-funded Korea Development Institute alleged Monday that restructuring was also proceeding without sufficient planning.

“During the Asian financial crisis, it was possible to focus solely on reorganizing failing companies,” said Kim Seong-tae, a senior economist. “But today . . . companies are struggling for greater reasons than before because of uncertainty in the global market and vulnerabilities in the competitiveness of whole industries. We need a coordinating body in the government that can deal with the task of creating a growth engine after restructuring is over and with the problem of rising unemployment subsequent to restructuring.”

In a separate reminder that industry restructuring will not always be painless, KDB announced Tuesday that the creditors of distressed STX Shipbuilding had decided to place the yard in court receivership – three years and $3 billion in assistance after they took possession of its operations.