During a meeting with reporters after the earnings announcement on May 15, Yoo Chang-keun, president and chief executive of Hyundai Merchant Marine Co. (HMM), a major shipping firm here, said that the company will pay back policy loans, which were funded by the previous government, before the term of the Moon Jae-in administration ends. The previous government expanded capital of 700 billion won (US$623.89 million) in order to normalize the national flag carrier.
The fastest way to clear off all the debts is to sell the company. The largest shareholder of HMM changed from Hyundai Elevator and 24 individuals to the Korea Development Bank (KDB) in July last year after capital increase as the point of a debt-for-equity swap. At that time, the KDB had a 13.68 percent stake. In the process, Hyundai Group Chairwoman Hyun Jeong-eun voluntarily offered to give up the management control of HMM.
Yoo refused to answer the question about the possibility of selling HMM before the Moon Jae-in administration ends. He said, “I am not in a position to answer the possible sale.” It seems that he indirectly said that major shareholders practically have the rights to decide on the sale.
The Moon Jae-in administration has announced to form a control tower for industry restructuring and thoroughly examine major restructuring industries, such as shipbuilding and shipping, after the inauguration. All eyes are on how the new restructuring control tower will work and investment banking industry react to the sale of HMM in the future.
In addition, Yoo said he doesn’t feel the need to install a watchdog agency for HMM’s reckless management. The company shows a stark difference from Daewoo Shipbuilding & Marine Engineering, which announced to create a joint government-private regulatory agency in order to prevent reckless management after receiving the public funds for the second time.
Meanwhile, HMM said in a regulatory filing on the same day that it posted sales of 1.3 trillion won (US$1.16 billion) and an operating loss of 131.2 billion won (US$116.93 million) on a consolidated basis in the January-March period. Sales jumped 84.6 billion won (US$75.4 million), or 7 percent, while operating loss dropped 31.5 billion won (US$28.07 million).
The company’s total debt was 3.08 trillion won (US$2.75 billion), slightly below its total assets of 3.83 trillion won (US$3.41 billion) as of the end of March. Its debt ratio stood at 411 percent. Ocean freights began to bottom out after the third quarter last year. However, the first quarter is seasonally off season and shipping costs has shown a continuous weakness especially after the Chinese New Year, causing operating losses.