KDB and HMM's Proposal for Debt Restructuring Rejected

The container ship Hyundai Together (file image courtesy an-d / 2012 / Creative Commons)

By MarEx 2016-03-17 21:33:25

On Wednesday, Hyundai Merchant Marine and state-owned Korea Development Bank announced that the beleaguered shipping firm's other bank creditors had rejected a proposal to reschedule the repayment of its maturing debt. 

Nonetheless, HMM and KDB say that they will consult the other creditors again on March 22, and that they plan to enter into a voluntary agreement to delay the maturity of HMM's debt by three months. KDB called on the other creditor banks to take similar measures to "share the burden," suggesting that this was the only means by which HMM could be saved. 

KDB says that in addition to bolstering HMM’s attempts to reschedule repayment, the agreement is intended to give "momentum" to HMM's ongoing efforts to renegotiate rates on the 30 ships of its chartered-in fleet - a key component of its attempts to remain solvent. At the present depressed rates for container shipping, HMM loses money operating its chartered ships, a KDB spokesman told the Wall Street Journal in February.

HMM has reportedly been asking its shipowners to cut its chartering costs by about one quarter; the firm's chief executive has notified owners that it could elect for bankruptcy protection instead if a negotiated solution could not be found. 

Though the timeline is uncertain, the firm is expected to enter receivership if creditors elect not to extend it some form of relief and if it cannot secure better chartering terms. 

Among the other measures to shore up its finances, HMM has also been continuing its years-long program of asset sales. Since 2014 it has sold off multiple vessels, including its LNG tankers, raising about $3 billion - and it is now looking at selling its 22 percent stake in brokerage firm Hyundai Securities, plus its tanker fleet and its bulker fleet. 

Earlier this month the firm also announced plans to take a write-down of 86 percent on its capital assets (down to $144 million, from $1 billion) effective April 21, in a reverse share split. The move will coincide with a planned, temporary suspension of trading in the company's shares. In the same announcement, Hyundai Group chairwoman Hyun Jeong-eun said that she would leave her position as chair of HMM's board. 

Separately, HMM’s PR firm informed Splash24/7 that “the South Korean minister of oceans and fisheries has commended and supported the beleaguered line’s restructuring efforts.”