The financially troubled Hyundai Merchant Marine Co. on Thursday said that its talks to be part of the world's largest shipping alliance have made significant progress, raising hopes that the negotiation will soon be completed. Hyundai Merchant said it has been seeking to join the group, 2M, spearheaded by AP Moller-Maersk A/S.

Hyundai Merchant has been implementing tough restructuring moves set by its creditors. The creditors, led by the state-run Korea Development Bank, demand that the country's No. 2 shipping line be included in a global shipping alliance in order to avert court receivership. "We have been in talks with 2M and in negotiations," the shipper said.

Separately, Hyundai Merchant has been in negotiations to be part of another shipping group, The Alliance, whose members include bigger local rival Hanjin Shipping Co. Membership in a global alliance is very important for the shipper to take on bigger rivals amid a glut in capacity, which has led to a drop in freight rates.

Hyundai Merchant and Hanjin Shipping, saddled with mounting debts and falling freight rates, have been dogged by their creditors to implement thorough restructuring schemes. Among others, they have been pressed to cut higher charter rates and reschedule debts owed to private investors.

Earlier this month, Hyundai Merchant reached an agreement with owners of its chartered ships to cut leasing rates by slightly over 20 percent over the coming 3 1/2 years.

Under the deal whose final terms are to be unveiled later this month, Hyundai Merchant and its ship owners agreed in principle to slash the charter rates by 21 percent for a 42-month period, which Hyundai Merchant claims will save some 530 billion won ($455 million) in total. Hyundai Merchant said it will swap half of the amount for its stocks, and the remaining will be paid after 2022 over a five-year period.

Also, bondholders of Hyundai Merchant Marine approved a 804.2 billion-won debt rescheduling proposal, under which more than half of its debt will be swapped for the shipper's stocks and the remaining debt will be paid back in two years.

The creditors also agreed to swap 680 billion won worth of debt for the shipper's stocks, as part of an effort to keep the shipper afloat. Hyundai Merchant had debts of 5.2 trillion won as of the end of March.

Stocks of Hyundai Merchant surged by the daily permissible limit of 30 percent to close at 15,400 won on the Seoul bourse. (Yonhap)