It has been found that Financial Supervisory Service (FSS) Deputy Governor Jo Yeong-je urged Yoo Chang-keun, president of Hyundai Merchant Marine, to deal with the Hyundai Group’s liquidity problems by implementing its three trillion won worth of self-help plans.
“Hyundai Group subsidiaries are in impairment of capital and the recession in the shipping industry is ongoing, which means you have to take proactive measures instead of waiting for a recovery in the sector,” said the deputy governor. He added, “Although things are not so harsh for now for the Hyundai Group and Hyundai Merchant Marine, they will have to meet market expectations by receiving new investments and going through restructuring.”
The Hyundai Group came up with a series of plans in December last year to save itself. According to these, all of its banking arms such as Hyundai Securities, Hyundai Asset Management, and Hyundai Savings Bank will be disposed of, while the port terminal and bulk carrier businesses will be slimmed down to raise a liquidity of at least 3.3 trillion won (US$3.0 billion).
This year, the group has to tackle the maturity of corporate bonds worth a total of 420 billion won (US$390 billion) and corporate bills worth 400 billion won (US$372 billion) in all. Unfortunately, the business conditions of most of the subsidiaries are showing no signs of improvement. For example, the debt ratio of Hyundai Merchant Marine has soared to 992.6% as of the end of last year.
The conflict between Hyundai Group Chairman Hyeon Jeong-eun and the second-largest shareholder Schindler can be another variable in the corporate reorganization. Schindler has announced that it would not participate in the paid-in capital increase of Hyundai Elevator scheduled for February this year, meaning a part of the solution is going awry already. In addition, market participants are pointing out that the group rated the prices of the assets to be sold relatively high, and the creditors are pressing it to speed up the sale of Hyundai Securities shares.
In response, the Hyundai Group accelerates its debt restructuring program in Hyundai Merchant Marine. The subsidiary is going to procure 93 billion won (US$86 billion) of cash during the first half of this year by selling 2.08 million of its shares in the Shinhan Financial Group.
Earlier in December last year, Hyundai Merchant Marine sold its 1.13 million shares in KB Financial Holdings at a price of 46.5 billion won (US$43 billion). In the middle of the same month, it sold 18,097 units of container boxes to US and Hong Kong-based lease companies on a sale and leaseback basis, to earn 56.3 billion won (US$52 million).
The group has recently selected a consulting company as well before disposing of the LNG carrier business unit of Hyundai Merchant Marine. The three financial subsidiaries, including Hyundai Securities, are planned to be sold via a special purpose company, too.