Domingo 21 de Octubre del 2018

HMM reaches deal with bondholders, charter talks remain

The principal amounts of the bonds are 240 billion South Korean won ($201 million), 60 billion won, 330 billion won, 120 billion won, and 54.2 billion won.

Hyundai Merchant Marine announced Wednesday that it has reached a resolution with holders of all five bond issues that are maturing in 2016 and 2017, but it still needs to secure lower charter rates from its tonnage providers to complete its restructuring.

The principal amounts of the bonds are 240 billion South Korean won ($201 million), 60 billion won, 330 billion won, 120 billion won, and 54.2 billion won.

HMM during June 1 meetings with bondholders explained its debt adjustment plan, which includes a debt-for-equity swap for more than 50 percent of the values while the outstanding amount is to be payable in three yearly installments after a two-year grace period.

Bondholders will be able to sell any shares acquired through the swap as soon as the shares are issued. HMM also gave bondholders an update on its efforts to negotiate lower rates from tonnage providers and said the company had made significant progress on this front. HMM credited the success of these bondholder negotiations to its progress in re-negotiating rates with shipowners.While some of the bondholders had refused HMM’s proposal at a March meeting, they agreed to HMM’s restructuring terms at this most recent gathering.

The success of these meetings means that HMM has carried out most of the restructuring plan it announced in February. The last piece of the puzzle is securing lower charter rates from the 22 tonnage providers that own 85 of the 124 ships the company operates. The company said it expects a positive outcome from those negotiations.

HMM needs to secure a 30 percent reduction in charter costs to satisfy its creditors, the largest of which is the Korea Development Bank, and secure a 680 billion won debt-for-equity swap.

Because the company has made so much progress in its restructuring, it believes that it will join the THE Alliance soon. HMM was initially left out of THE Alliance because of its liquidity crisis. THE Alliance is made up of Hanjin Shipping, MOL, NYK Line, “K”Line, Hapag-Lloyd, and Yang Ming Line.

Once the debt-for-equity swap is completed, HMM will have drastically lowered its debt ratio and will qualify for a government program to purchase mega-ships on favorable financial terms. The company currently does not operate any mega-ships, which are believed to be critical to the company’s future competitiveness.

HMM's loss widened to 276.68 billion won in the first quarter from a 49.79 billion won net loss in the same period of 2015, as revenue fell 18.8 percent year-over-year to 1.16 trillion won.

HMM as of March 31 had a working capital deficit of 2.46 trillion won. With long-term debt of 1.75 trillion won and shareholders’ equity falling to 44.78 billion won after the first-quarter loss and an earlier share consolidation exercise, the company’s gearing ratio is a high 39:1.

In its efforts to normalize operations the company has raised more than $3.5 billion after selling its stakes in Hyundai Securities, a container terminal in the Busan New Port, Hyundai Logistics, and Hyundai Learning and Training Center in addition to offloading its dedicated liquefied natural gas and dry bulk divisions.

“We sincerely thank our investors’ kind understanding and trust for making a tough decision,” a spokesperson from HMM said. “We will do our utmost to conclude charter negotiation and join shipping alliance so that we could normalise HMM’s business as soon as possible.”

Fuente: Journal of Commerce

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