Hyundai Merchant Marine inked a deal with 22 shipowners to lower charter fees by 21 percent -- equivalent to 530 billion won ($454 million) -- to take a step forward in normalizing its business, said its main creditor Korea Development Bank on Friday.
“For the 530 billion won in charter fees, the shipowners agreed to receive some as new shares and the rest as a long-term bond,” the creditor bank said in its statement, adding this would improve the financial soundness of South Korea’s second-biggest shipping company.
The latest deal came after Hyundai Merchant Marine and the state-run Korea Development Bank negotiated with shipowners including Greek Danaos Shipping, Navios Maritime Holdings and the U.K.-based Zodiac Maritime for four months.
Hyundai Merchant Marine, which borrows 83 ships from global shipowners, has been struggling with high charter fees amounting to 1 trillion won per year. The fees, which were set at high rates when the industry saw a boom from 2006 to 2011, have recently become a money pit, as the recession in the industry persisted long.
The agreement to lower the charter fees is expected to help the Korean shipping company lower its debt ratio from around 5,300 percent as of March to 220 percent at the end of this year, industry watchers said. In return, the major shareholder of the firm will be changed from Hyundai Elevator and Hyundai Group chairwoman Hyun Jeong-eun to creditors, who are expected to hold a combined 40 percent stake in the firm.
The Korea Development Bank added that it would continue to ramp up efforts to help the company normalize its business and support the inclusion of HMM in THE Alliance, a new shippers group led by Germany-based Happag-Lloyd.
The news report on the latest cut raised the shares of HMM by 0.6 percent on Friday.
Elsewhere, Korea’s big three shipyards, Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries, all rose slightly on the news that their creditors had approved their self-rescue plans.
By Shin Ji-hye (
shinjh@heraldcorp.com)