Creditors led by the state-run Korea Development Bank are soon to come up with a detailed plan to inject new capital for Hyundai Merchant Marine, as the ailing shipping firm is near completing negotiations with shipowners over ship leasing fees.
Creditors next week will start discussing a debt-to-equity swap plan, KDB spokesman Cho Seong-wook said Wednesday. A debt-to-equity swap refers to swapping loans into stocks of the company to alleviate liquidity crunch.
Korea Development Bank headquarters in Seoul (Yonhap)
“It will take about a week to come up with the final decision, after creditors begin discussions next week,” Cho told The Korea Herald.
Cho refuted a Yonhap news report which said creditors would inject about 760 billion won ($650.6 million) into Hyundai Merchant through a debt-to-equity swap scheme.
“The amount for the debt-to-equity swap reported in local news media is not correct. The detailed amount has not been decided,” he said.
Currently, Hyundai Merchant’s secured debts to financial institutions amount to 1.1 trillion won, according to the nation’s No. 2 shipping firm. About 50 to 60 percent of the amount may be injected as a debt-to-equity swap scheme, industry sources said.
The creditors had earlier said that they would roll over debts and inject fresh loans for Hyundai Merchant, on the condition that the company lowers ship leasing rates and persuade non-secured bondholders, such as the National Agricultural Cooperative Federation’s unions and the National Credit Union Federation of Korea, to extend the maturity of their debts ending this year and next year.
If any of these schemes fail, the company will be put under court receivership.
Hyundai Merchant refused to reveal how much charter rates the company should negotiate to cut, saying it would affect bargaining power. Local media speculated a rate cut of about 28-30 percent.
The creditors and the government had earlier urged the company to complete negotiations with shipowners by May 20.
All bondholders of Hyundai Merchant are scheduled to meet on May 31 and June 1 to renegotiate over 804.3 billion won in debts, according to the company.
The firm’s rival Hanjin Shipping and other smaller players have also suffered huge losses in recent years due to high charter rates amid a global contraction of trade and falling demand from China.
By Kim Yoon-mi (yoonmi@heraldcorp.com)