Restructuring before Merger
The creditors of Hanjin Shipping and Hyundai Merchant Marine decided to call for intensive restructuring and business recovery measures before any combination of the two companies.
“Now is too early to mention a merger although the possibility is open,” one of them said, adding, “Business combination between two dying companies is meaningless and they should go back to normal via voluntary agreements first.”
One of the obstacles to their combination is the complexity of their pecuniary relationship. The two companies have intertwined interests with regard to charterage, ship financing, debenture, etc. With the situation as it is, discussions of a merger are likely to make debt restructuring very difficult.
The creditors including the Korea Development Bank also have to bear huge costs in the case of a merger, which is rarely acceptable by the general public. At present, Hanjin Shipping has a total debt of 5.6 trillion won or so, approximately 700 billion won of it in the banking sector. The amounts are 4.7 trillion won and one trillion won for Hyundai Merchant Marine.
The problem is that, in the case of a merger, their public offering bonds amounting to about 1.25 trillion won should be fully repaid or equivalent securities should be provided once the debenture holders raise an objection to the merger. Besides, a cost of at least one trillion won is likely to be incurred when shareholders opposed to it exercise their rights to purchase shares.