Creditors expected to roll over Hyundai Merchant's debt

By Kim Jae-won

Creditors of Hyundai Merchant Marine (HMM) are likely to roll over part of the shipper’s 4.8 trillion won debt, on condition that the company reduce its payments to ship owners, helping the cash-strapped company stay afloat, creditors said Thursday.

Korea Development Bank (KDB) said that creditors will approve the self-rescue plan by the embattled shipping unit of Hyundai Group next week, as the shipping company is negotiating with ship owners to cut fees for renting their ships. The state-run KDB leads a group of creditors including Woori Bank.

“HMM could post profits of 400 billion won if it could cut the fees by 20 percent,” said a KDB spokesman. “With this approval, creditors want to show that they will take responsibility for the company.”

The announcement came amid HMM’s struggle to pay back its debt, hit hard by low demand in the global market due to sluggish economic growth. The shipper also suffers from high ship rental fees as they struck the deal a few years ago when demand was high.

HMM said it is renegotiating rental costs with ship owners in Europe and Japan.

“We have had meetings with ship owners from the U.K., Greece and Japan since February,” said an HMM spokesman. “The talks are going smooth, though it is too early to disclose the results.”

If HMM's self-rescue plan is approved, the shipper's maturing debts will be rolled over and partly rescheduled. The company applied Monday for self-rescue measures which need approval from its creditors, in a bid to get its business back on track.

In a regulatory filing, Korea's second-biggest shipper said "it filed for co-management with its creditors" to improve its financial footing and thus its business. The latest measure came as creditors are seeking to help the cash-strapped shipper tide over its worsening liquidity situation.

Earlier this month, HMM decided to push for a capital reduction aimed at improving its financial health. Hyundai Group has been working to salvage the affiliate, one of its key units, which has been in the red for years due to a decline in freight rates and global trade.

Last year, HMM posted 253.5 billion won in operating losses, with its capital significantly eroded.