Troubled Hyundai Merchant Marine has won bondholders’ full support on restructuring total bond debt over 800 billion won ($670 million), bringing much needed relief to the cash-strapped firm.

Bondholders approved the nation‘s second-largest container transporter’s proposal to reschedule debt worth 174.2 billion won with nearly full consent during two meetings held at Hyundai Group’s headquarters in Seoul on Wednesday. 


“I agreed with the plan with the expectation that the company has survival probabilities and unfavorable factors will be gone soon,” an investor who attended the gathering said.

The plan includes debt-for-equity swaps of more than 50 percent of the value of the bonds, with the remainder to be paid off in three annual installments following a two-year grace period.

Bondholders will be able to sell any shares acquired through the swap as soon as the shares are issued.

With the green light, the company recast 804 billion won in debt at the two-day meeting, as bondholders voted unanimously in favor on restructuring 630 billion won in debt Tuesday under the same condition.

Persuading bondholders to change credit terms was crucial for HMM, battling losses caused by a slump in the shipping industry, to stay afloat, as it was laid out in conditions for a creditor-led rehabilitation scheme agreed upon by lenders.

There are two other key prerequisites demanded by creditors: reaching an agreement with foreign shipowners to get deep discounts for rates on leased vessels and inclusion in a global shipping alliance to stay competitive.

“We are putting efforts to wrap up the charter fee negotiation and will start to make moves for joining shipping alliance in earnest from tomorrow,” said Kim Chung-hyeon, the chief financial officer after the meeting.

HMM is in final talks with the owners of its chartered ships to cut leasing rates, the outcome of which may be decided later this week.

“Breaking a deadlock on the leasing rate would alleviate investors’ concerns, as it was the biggest issue, but the level of charter rate cut is expected to be around 20 percent, which falls short of its initial goal of 28.4 percent,” Hanwha Investment & Securities said in a report published Wednesday.

The carrier will push to join a newly formed ocean carrier consortium dubbed “THE Alliance” before the group confirms membership in September.

With losses posted in five of the past seven years, HMM has been selling assets to reduce debt that had ballooned to almost 800 percent of its equity.

So far, the company has secured some 1 trillion won in cash injections to ease its liquidity crisis. On Wednesday, HMM raised 900 billion won by selling its 22.43 percent stake in Hyundai Securities to KB Financial. It also sold noncore assets such as its terminal in Busan New Port and bulk cargo unit Bulk Liner Division for 80 billion won and 120 billion won, respectively.

In March, Hyundai Group Chairwoman Hyun Jeong-eun tapped her own wealth of 30 billion won to acquire 4 million shares in HMM’s new stock issue.

HMM‘s loss widened to 276.68 billion won in the first quarter from a 49.79 billion won net loss in the same period of 2015.

By Park Han-na (hnpark@heraldcorp.com)