Hyundai Merchant’s shares fall on concern of share dilution in debt swap

Shares of Hyundai Merchant Marine Co. plunged 19% in trade today, the most in 3 months, as investors worried that the company’s debt-to-equity exchange plan would dilute their shareholding.

Hyundai Merchant’s stock declined to KRW 15,000 in trade in Seoul, today.Rival firm Hanjin Shipping‘s shares also dropped as much as 9.2%, as investors feared a similar outcome, as the company is in negotiations with lenders about a possible swap, similar to Hyundai’s.

Hyundai Merchant will issue 236m new shares to its creditor banks, bondholders and shipowners in the debt-for-equity swap as part of its restructuring plan.

The plan follows South Korea’s Finance Minister Yoo Il Ho’s call for restructuring in the shipping industry as weak demand and dwindling cash levels hurt the companies.

The nation also prepares to start a KRW 11tn fund aimed at restructuring its ailing shipbuilding industry.

Source: Bloomberg

Hanjin Shipping yet to negotiate cut in charter rates

According to sources, troubled South-Korean shipping firm Hanjin Shipping Co. is yet to successfully negotiate a cut in leasing rates with the owners of its chartered ships, which was a key precondition set by its creditors to avert court receivership.

The company was yet to receive a favourable response from the owners of charter ships as of date. However, Hanjin’s struggle for the charter rate cut is in stark contrast to its smaller local rival, Hyundai Merchant Marine Co., which has reported “significant” progress in its charter rate reduction talks.

Hyundai Merchant, won approval from its bondholders for restructuring about KRW 800bn ($671m) of its debt during negotiatio

Based on information from certain sources, Hanjin Shipping faced difficulty in negotiations as it had to negotiate with a large number of shipowners.

Previously, a vessel operated by Hanjin Shipping was impounded for three days in South Africa for unpaid charter fees, raising concerns that the shipper’s financial status has dramatically worsened.

Last month, creditors of Hanjin Shipping accepted the troubled shipping giant’s debt restructuring plan, also granting a three-month suspension on all payments of principal and interest.

According to creditors, the self-restructuring plan would only be effective as long as all of the company’s lenders and shipowners chartered by Hanjin also remained committed.

Last month, the shipper’s bondholders approved some 36 billion won worth of debt recast proposal.

Separately, Hanjin Group’s, the parent company of Hanjin Shipping, chairman Cho Yang-ho agreed to give up his managerial control of the shipping unit under the self-rescue plan.

As of end-2015, the company’s total debt reached KRW 5.6tn.

Source: Hellenic Shipping News

South Korea’s Big Three outline restructuring plans

According to sources, South Korea-based Samsung Heavy Industries and Hyundai Heavy Industries received lender approval on their respective restructuring plans.

Apart from headcount reduction, Hyundai Heavy intends to sell real estate, stock, holdings and non-core businesses for balance sheet improvements totaling to $3bn.

Samsung Heavy Industries’ creditor group, led by Korea Development Bank, has provisionally approved a $1.25bn restructuring plan for the firm. SHI’s plan reportedly includes measures similar to HHI’s; although details were not available.

Daewoo Shipbuilding and Marine Engineering, have announced plans to trim wages by 20% and lay off executives. It has announced workforce reductions of 2,300 employees by 2019.

Daewoo also intends to sell its Seoul headquarters building to raise funds.

The “Big Three” reported combined net losses of $4.9bn in 2015, negatively impacted by a marked decline in shipbuilding orders in offshore, bulk and container shipping, and the yards secured only a handful of orders between them in the first months of 2016.

Separately, South Korea’s government is already discussing ways to shore up state-backed creditor banks like KDB and KEXIM in anticipation of the yards’ future needs for large-scale assistance.

Source: The Maritime Executive