Bondholders of Hyundai Merchant Marine Co. on Wednesday approved an additional 170 billion won ($142 million) debt rescheduling proposal by the financially shaky shipper, clearing one of the hurdles for a creditor-led restructuring, company officials said.

During a two-day meeting that started on Tuesday, the shipper's bondholders gave the nod to a total 804.2 billion won debt rescheduling scheme under which more than half of the debt will be swapped for the shipper's stocks and the remaining debt will be paid back after two years.

Last week, its creditors, led by state-run Korea Development Bank, agreed to swap 680 billion won of debt for the shipper's stocks, as part of an effort to keep the shipper afloat. Hyundai Merchant was about 5.2 trillion won in debt as of the end of March.

The debt recast is one of the key prerequisites for the shipper to be put under a creditor-led rehabilitation scheme.

Hyundai Merchant is in final talks with owners of its chartered ships to cut leasing rates with the outcome possibly coming out later this week.

Creditors have also demanded that the shipper be included in a global shipping alliance to stay competitive.

Hyundai Merchant could be excluded from a group of shipping lines unless it cuts its charter rates and reschedules its debt.

Hyundai Merchant claims that its inclusion into a global shipping alliance will be guaranteed if it successfully completes talks over the charter rate cuts and its debt recast is approved by its creditors and bondholders.

Hyundai Merchant and other local shipping lines have been grappling with a glut of ships and subsequent falls in freight rates. (Yonhap)