Hyundai Merchant Marine Co. (HMM), has decided to buy a 20 percent stake in Hanjin Shipping Co.'s Terminals International LLC (TTI), which operates a terminal at the Port of Long Beach in the United States. With the latest decision, the company will be able to secure a stable profit on the Asia-U.S. services.
HMM, South Korea’s largest shipping line following Hanjin’s collapse, said its board of directors agreed to buy a 20 percent stake in Hanjin Shipping's TTI and equipment leasing firm HTEC, as well as the debt owed to its shareholders, for a combined US$15.6 million (18.3 billion won). The deal will make HMM the No. 2 stakeholder in TTI, which runs a container terminal at the Port of Long Beach, after Geneva-based Mediterranean Shipping Co. (MSC), the world's second largest container line which owns the remaining 80 percent stake in TTI.
HMM will become the second biggest shareholder of the Long Beach Terminal but the company will benefit from it with less responsibility. HMM will receive the same port tariff rates with MSC, and it will help reduce terminal handling costs and secure stable profitability.
Also, MSC will stand surety for TTI’s loans worth US$320 million (376.5 billion won) and its lease worth US$900 million (1.06 trillion won) to be paid to the U.S. Port Authority for the next 11 years. As HMM is not responsible for TTI’s debts and surety, its financial burden has been reduced.
The TTI's board will be comprised of two directors from MSC and one from HMM. MSC needs the consent of HMM when making an important management decision, such as a change of business purpose and capital expenditure.
HMM’s principal benefits from the acquisition of the TTI stake are to expand its basic slot allocation (BSA) for the U.S. West Coast, to buy the stake at low investment costs, to receive same port tariff rates with MSC and to improve the sales competitiveness in Asia-U.S. market.
An official from HMM said, “We have a modest financial burden for the acquisition of the TTI stake and no responsibility for contingent liabilities. The handling volumes at the Long Beach Terminal will dramatically increase as we strengthen the Asia-U.S. services through a strategic cooperation with 2M beginning of April.”
Previously, HMM formed a consortium with MSC to acquire the TTI stake. However, HMM withdrew from a joint bid with MSC due to its low credit ratings and agreed to buy the stake from MSC after MSC made a sole bid.
Meanwhile, the Long Beach Terminal is the second busiest container port in the U.S. West Coast and it had been operated by TTI, a subsidiary of Hanjin Shipping. Hanjin Shipping had a 54 percent stake in the terminal.