Different Circumstances
Hyundai Merchant Marine (HMM) graduate from a long restructuring process as it signed a condition-free voluntary agreement with its creditors. With the date of payment after capital increase as the point of a debt-for-equity swap, virtually HMM exchanged hands on July 22.
On the other hand, Hanjin Shipping is bent on cutting a shortage of funds (about one trillion won) via negotiations over ship charter fees and ship finance but no support measures yet from the Hanjin Group leaves room for going into court receivership.
According to the shipping industry and creditors, HMM will officially sign an agreement on the implementation of a management normalization plan on the day with creditors. Meantime, HMM signed a “conditional” voluntary agreement with creditors. The company will additionally sign an agreement to implement management normalization in the future while satisfying three conditions such as negotiations over ship charter fees, debt readjustment and joining a shipping alliance. Now, HMM is planning to normalize its business, a new goal under the joint management of creditors.
HMM successfully changed debts of 1.4 trillion won into equities through subscription to capital increase for the swap on July 18 and 19. Creditors subscribed all of planned 684 billion won. Vessel owners and debenture holders subscribed to about 290 billion won and 420 billion won, respectively.
The debt-for-equity swap made a big improvement to HMM’s financial structure. Its debt ratio fell to the 200% level in from the 5000% level in the first quarter. The 200% level is evaluated as an excellent level in the shipping industry.
When creditors become the largest shareholder of HMM, HMM will place an order to buy new ships by way of a 12-trillion-won shipping fund after studying what vessels and how many of them the shipping company needs.
By contrast, Hanjin Shipping is looking for a way to raise funds to address its lack of money by 2017. The amount of the financial scarcity is about one trillion won. Hanjin Shipping is planning to slash operating cost via negotiations over ship charter fees while putting a hold on the payment of the principal of about 500 billion won in ship finance to ship finance firms at home and abroad.
It is said that Hanjin Group chairman Cho Yang-ho has not yet made a decision although Hanjin Shipping with no more asset to sell off badly needs support from the group to secure urgently needed funds.
Lee Dong-gul, chairman of the Korea Development Bank directly urged chairman Cho to make a decision. “If the Hanjin Group sincerely shows its will to support Hanjin Shipping such as addressing a lack of liquidity, conditions for the normalization of Hanjin Shipping will be created,” the Korea Development Bank said.