Normal Operation Expected
Hyundai Merchant Marine’s efforts for business stabilization are expected to bear fruit sooner or later with its charter rate negotiations about to be wrapped up.
The negotiations led by Vogo Fund founder Byeon Yang-ho and lawyer Mark Walker at Millstein & Co., who had worked with each other during the Asian financial crisis in 1998, seemed to go well in their early stage in early February as most ship owners expressed their intentions to cut the rate. However, the talks went awry in April as Zodiac Maritime refused to do so and the others decided to follow suit.
Still, the atmosphere has changed again, fortunately for Hyundai Merchant Marine, since the South Korean government clarified that it would resort to drastic measures such as court receivership in the event of failed negotiations. Deputy Prime Minister Yoo Il-ho’s and Financial Services Commission chairman Yim Jong-yong’s remarks to that effect carried much weight, giving the ship owners a sense of urgency. At present, the negotiations with Zodiac Maritime are almost completed and final talks are underway with a Singaporean ship owner.
The creditors of Hyundai Merchant Marine are planning to convert 50% of their receivables into stocks once the negotiations are wrapped up. Currently, the creditors including the Korea Development Bank (KDB) have receivables worth one trillion or so in total and its debentures that can be adjusted via a meeting of debenture holders are worth about 800 billion won.
Once half of that worth 900 billion won is turned into stocks, Hyundai Merchant Marine’s debt ratio is reduced from 1,565% to 367.7%. The actual percentage is likely to be even lower than that because half of the charter rate reduction is turned into stocks as well. Then, Hyundai Merchant Marine becomes eligible for the US$1.2 billion shipping fund raised by the public and private sectors, which is to be provided for those with a debt ratio of 400% or less.