By Kim Jae-won
The fate of the troubled Hyundai Merchant Marine (HMM) is up in the air as its creditors and ship owners failed to reach an agreement to cut charter fees, Wednesday, a key condition to keep the debt-ridden shipper afloat.
Tensions are rising with creditors cancelling a conference call to ship owners Thursday as negotiations showed little progress. No date has been set for additional meetings.
The Korea Development Bank (KDB), which leads the group of creditors, said there was no option but to put HMM under court receivership if the ship owners refuse to reduce the fees.
Hyundai pays four to five times higher fees than current ones as it signed long-term contracts before the global financial crisis in 2008 when demand for shipping was high.
“We are sticking to the principle that HMM will enter court receivership if the charter fee negotiations fail,” said a KDB spokesman.
But the bank left the door open for more talks, saying it could extend its deadline for negotiations, which is set for today. “Nobody knows how the situation will unfold at the moment,” said the spokesman.
Market watchers said that ship owners hold the key to preventing HMM from going into receivership.
“Now, the ball is in the ship owners’ court,” said an industry source familiar with the negotiations, asking not to be named. “They can change the situation by suggesting new options.”
Analysts said that ship owners worry that they may face claims from other shippers to lower charter fees if they cut them for Hyundai. Ship owners could also be accused of breach of trust by shareholders if they reduce the fees without offering them compensation.
The owners need solid reasons to cut the fees which they can explain to shareholders; they also want to avoid receivership because it would lead HMM to return ships to them, seriously hurting their revenue. Hyundai pays about 2 trillion won in charter fees to ship owners every year.
Four key containership owners ― Navios Maritime, Danaos Corp., Container Carriers Corp. (CCC) and Eastern Pacific Shipping (EPS) took part in the meeting held at the headquarters of HMM in downtown Seoul.
Navios, Danaos and CCC are Greek companies while EPS is based in Singapore. U.K.-based Zodiac Maritime, one of the five largest ship owners which leased their ships to Hyundai, did not take part in the meeting.
The KDB said that the state-run bank would be willing to support HMM if ship owners cut the fees, lowering the financial burden on the shipper. The bank plans to a debt for shares swap as part of its restructuring blueprint.
HMM’s total debt reached 5.2 trillion won in March, according to data from the Financial Supervisory Service. Bank creditors are owed about 1 trillion won while corporate bondholders and other creditors are owed the remaining.