Government considers merging Hanjin Shipping and Hyundai Merchant Marine

The government of South Korea stated that they would consider merging ailing Hyundai Merchant Marine (HMM) and Hanjin Shipping, should they successfully normalize their operations. Currently, the two debt-riddled shippers are undergoing restructuring programs.

Depending on the outcome of the program, state-run Korea Development Bank (KDB) would emerge as the controlling stakeholder of the firms, whilst the government would then lead the merger of the pair in the future.

Restructuring update:

According to sources, Hanjin Shipping continued to struggle to obtain a cut in charter rates during negotiations with the owners of its chartered fleet. The charter rate cut was one of the key conditions set by its creditors for the company to avert court receivership.

According to sources, Hanjin Shipping, has been in talks with about 22 owners of chartered ships since April 2016, but reported little progress during negotiations.

Hanjin’s struggle for a charter rate cut was in stark contrast to its smaller local rival, Hyundai Merchant Marine, which has reached an agreement with its ship owners to cut charter rates by 21%.

Source: KoreaTimes

 

 

South Korean shipbuilders sign MOUs for Iranian $2.4bn shipbuilding projects

In a welcome move which temporarily diverts the financial pain suffered by South Korean shipbuilders, Hyundai Heavy Industries (HHI) and Daewoo Shipbuilding & Marine Engineering Co (DSME) have reached preliminary deals, collectively estimated at $2.4bn with an Iranian shipping company Islamic Republic of Iran Shipping Lines (IRISL) and an Iranian petroleum company Iranian Offshore Oil Co. (IOOC) to build ships, tankers and offshore equipment.

However, the efforts have fallen short of reaching official contracts as the companies have just signed memorandum of understandings (MOUs).

Hyundai Mipo Dockyard, a subsidiary of HHI, signed a MOU with IRISL for orders of 10 tankers and at least six handy-size bulk carriers.

Hyundai Heavy was also in talks with IRISL for building around six container carriers with a 14,500 TEU capacity. In this deal, however, HHI was known to be competing with China’s Dalian Shipbuilding Industry Co.

IRISL, which operates about 115 oceangoing vessels, with a total of capacity of 3.3m tons, has an aging fleet which requires urgent replacement. While IRISL was modernizing its vessels, the company was chartering ships from foreign shipping companies including Greek carriers.

DSME was in negotiations with IOOC to seal orders of at least five jack-up rigs. But the deal also reached just signing a MOU.

Separately, Daewoo’s creditors have urged the shipbuilder’s workers to refrain from going on a strike as the restructuring plan outlined by the company had proposed job cuts in order to stay viable, financially.

Source: Business Korea

 

Creditors urge Daewoo Shipbuilding’s workers not to go on strike

According to sources, creditors of South-Korea’s Daewoo Shipbuilding & Marine Engineering urged the company’s workers to refrain from going on strike, saying that it would deter the ongoing efforts to restructure the financially shaky firm.

Sources state that about 7,000 unionized workers at Daewoo Shipbuilding’s yards are scheduled to vote on whether or not they will launch a strike, claiming that the shipbuilder’s restructuring schemes submitted to its creditors negatively impacts the workers employment.

The results of the decision to strike is expected to come out by late Tuesday.

The company and union, in particular, are also at odds over the plan to slash the workforce by an additional 2,300 to 10,000 by 2019.

Last year, Daewoo Shipbuilding’s creditors provided KRW 4.2tn ($3.58bn) in financial aid to prevent its workers from going on a strike. Since August 2015, the creditors, led by state-run Korea Development Bank, have provided KRW 3.2tn in financial help to the shipbuilder.

Last week, the shipbuilder mapped out a KRW 5.3tn self-rescue plan, approved by its creditors, which includes asset sales and a spin-off of key business units.

Separately, the union of Hyundai Heavy Industries is set to hold a meeting of its representatives on Friday to decide on whether to go on strike.

Source: Korea Times

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

South Korea’s KRW 11tn fund to aid its ailing shipping industry

The Government of South Korea plans to create a KRW 11tn ($9.5bn) fund to support restructuring of the nation’s shipping and shipbuilding industries. The move comes in line with the central bank’s decision to lower benchmark borrowing rates as part of pulling the nation’s economy out of its slump.

The government aims to start operating the fund from 1 July 2016 until the end of 2017.

According to South Korea’s Finance Minister Yoo Il Ho, the fund would buy hybrid bonds issued by state-run banks.

Separately, the finance ministry plans to inject KRW 1tn of capital into the Export-Import Bank of Korea by September 2016 to ensure Kexim’s capital ratio doesn’t fall by too much.

The government currently estimates that these lenders would require about KRW 5 – 8tn of capital, assuming that Korea Development Bank and Kexim meet BIS ratios of 13% and 10.5%, respectively. KDB’s ratio currently was at 14.6% while Kexim’s was 9.9%.

Source: Bloomberg

Southern Korean central bank lowers rates to aid debt restructuring

South Korea’s central bank unexpectedly cut the benchmark seven-day repurchase rate to 1.25%, a new record low, to aid indebted companies in their restructuring plans. The South Korean won moved sharply lower.

The decision to cut benchmark rates was projected by only Goldman Sachs of 18 economists surveyed while others saw a reduction in the next couple of months.

South Korea’s sovereign yield dropped to a record low this month after minutes of the May meeting showed a board member called for lower rates while the government and central bank planned to create a KRW 11tn ($9.5bn) fund to facilitate corporate restructuring.
 
The board’s May minutes showed several members were worried about downside risks from the corporate overhaul such as unemployment and declining investment.
 
The government’s plans to aid corporate restructuring would support its ailing shipbuilders who had slashed jobs and were in process of restructuring their debt.
 
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