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Creditors Approve Debt Recast for Hyundai Merchant

Hyundai
File image courtesy Shipping21

By MarEx 2016-05-31 21:34:11

Financially troubled shipping line Hyundai Merchant Marine has received approval from a group of its bondholders for a restructuring plan allowing it to exchange about $250 million in debt for equity. It will have two years to pay back an additional $250 million, and the firm will continue negotiating for a recast on additional debt on Wednesday; as of the end of March, it owed a total of $4.4 billion.

HMM's creditors would like to see the firm avoid court receivership, and have already agreed to a $570 million debt for equity swap if certain conditions are met. Its lenders and state regulators have been pressing the line to reach an agreement on rate reductions of about 30 percent with all its shipowners. Two thirds of its vessels are chartered, and last year it paid out roughly $1.6 billion to owners, a third of its revenue. Like many lines, HMM has been caught between locked-in fixed costs and plummeting container rates, and rate reductions are a central part of its self-rescue plan. The firm expects talks with owners to wrap up later this week and has expressed optimism for the outcome.

On Monday, the chairman of South Korea's Financial Services Commission (FSC), Yim Jong-yong, said that HMM and its shipowners had recently made "significant progress" despite several months of insistent statements by many owners that charter rates were not negotiable. He suggested that general outlines of a deal were now in place and that negotiators were now working out the smaller details – including the amount of the rate cut. 

HMM also hopes to gain approval for inclusion in the newly formed carrier vessel-sharing agreement THE Alliance at a meeting in Seoul June 2. Alliance membership is another key creditor demand, and many view it as a necessity for carrier viability in an oversupplied, highly competitive market. Domestic competitor Hanjin Shipping has already joined; some industry observers have suggested that the best outcome for HMM could be to merge with its compatriot, leaving only one major South Korean line.