KDB pledges radical reform for HMM

By Jhoo Dong-chan

Hyundai Merchant Marine CEO Yoo Chang-keun speaks during a meeting with employees at company headquarters in downtown Seoul on Oct. 26. During the meeting, Yoo announced the company will reach $10 billion in sales by 2022. / Courtesy of Hyundai Merchant Marine

Korea Development Bank (KDB) has vowed to carry out intense reform of Hyundai Merchant Marine (HMM) to normalize the ailing shipping firm's management. KDB is HMM's largest shareholder with a 13.13 percent stake.

The decision came after a due diligence submitted by Samil PricewaterhouseCoopers, which claimed HMM could be “capital impaired next year and the bailout requires at least 6 trillion won ($5.32 billion) by 2022.”

The due diligence also includes HMM's debt, currently estimated at 2.54 trillion won, which is likely to reach 3.32 trillion next year and eventually top 6.66 trillion won by 2022. Taking into account the shipping firm's total assets of 3.02 trillion won, HMM will face capital impairment next year.

“KDB has signed an MOU with HMM to improve the firm's competitiveness. The bank will also dispatch a specialist group to help strengthen its governance,” KDB said in a press release.

HMM became the nation's only shipping operator after Hanjin Shipping, once Korea's largest shipping firm, went bankrupt in 2017. KDB decided not to salvage Hanjin, citing the firm's irresponsible management for nearly a decade and ruinous debts.

In a bid to rescue the nation's only remaining shipping firm, the government and the state-run bank decided to inject 800 billion won into HMM to beef up its business by helping it secure large container carriers and increase its stake in Hyundai Pusan New-Port Terminal.

However, the injection still falls short of the funds HMM needs to address its cash shortage issue.

“The bailout does not automatically lead to strengthening the firm's competitiveness,” KDB Chairman Lee Dong-geol said during a media conference earlier this month.

“It also needs to improve its management while strengthening its sales to stay afloat.”