Asia/Pacific News
HMM Says Stabilization Within Reach, But its Financials Cause Other Carriers to Be Harshly Assessed
Although it defaulted on the repayment of KRW 120 billion ($105-million) of its publicly traded bonds due last week, Hyundai Merchant Marine (HMM) says it has "stepped closer to stabilize its business from July" by signing a stock purchase agreement for disposing its stakes in Hyundai Securities at KRW 1.24 trillion ($1.08 billion).
In an emailed statement, HMM goes on to state that "The sale of Hyundai Group's financial affiliate is a vital part of HMM's restructuring plan, and therefore a swift deal closing is expected to follow for the company's stabilization."
Proceeds of the sale will to towards "the stable operation of HMM," according to the statement, which added that "the enhanced liquidity will play the major role in stabilizing HMM's businesses and financial structure."
Still, HMM's default on repayment caused the Korean Investors Service (KIS) to downgrade its corporate bond ratings to `C' – its eighth successive downgrade since 2013 – and the company's financial deterioration has caused other carriers to be scrutinized.
Alphaliner, in its latest weekly report, notes that Standard & Poor's (S&P) has even downgraded industry leader A.P. Moller-Maersk's credit outlook from stable to negative; S&P has also lowered CMA CGM's corporate credit rating from 'B+' to 'B' and believes the carrier will "see constrained earnings, owing to the depressed conditions in container shipping" combined with risks from CMA CGM's planned acquisition of NOL and further fleet expansion.
Other carriers such as MOl and K Line are taking significant impairment losses on the values of their shipping assets (the former to the tune of JP¥179.3 billion ($1.65-billion) in the last quarter of its fiscal year ending March 2016).
Alphaliner notes that "Although other main carriers have so far resisted taking any significant write-offs.....the glut of containerships, weak operating environment, and low scrap prices have continued to push down the values of both their containerships and container equipment to record low levels, and write-offs could become unavoidable."
Of HMM's predicament, Alphaliner states, "The Korean carrier is facing significant resistance from bondholders and charter vessel owners, who are looking at the government-backed Korea Development Bank to bear most of the burden of restructuring HMM's debt of some $3.6-billion, of which $2.1-billion are currently classified as short-term debt."
Last month, Ship & Bunker reported that industry analysts at Drewry thought a tie-up between HMM and Hanjin would help ensure the survival of the troubled company.
