Asia/Pacific News
Alphaliner: Biggest Ever Container Shipping Bankruptcy Edges Closer
Alphaliner says that, without further government support, bankruptcy is growing closer for Hyundai Merchant Marine (HMM) after the company's bondholders rejected the company's proposed debt rescheduling plan on March 17, and negotiations for charter rate reductions from shipowners over the past month have failed.
While HMM's main creditor, Korea Development Bank (KDB), has agreed to extend principal and interest payments by three months, the company will still be required to secure approval from HMM's bondholders for the extension of the bonds' repayment maturity, which is reported to include KRW 220.8 billion ($190 million) due at the end of April, and an additional KRW 299.2 billion ($257 million) due at the end of July.
"The potential bankruptcy of the financially troubled South Korean carrier would be the largest-ever in container shipping. Based on the total vessel container capacity operated by the respective insolvent carriers, a failure of HMM would dwarf all previous bankruptcies in this sector," said Alphaliner, noting that the company's survival seems to depend on a government bail out.
On March 18, at a meeting in which Hyundai Group's chairwoman Hyun Jeong-Eun resigned as HMM's chair, company shareholders approved a 7-to-1 capital reduction - a development said to be seen as a signal in potential change in HMM ownership.
"The prolonged downturn in the global shipping market and the depressed freight environment has prevented the company from overcoming the crisis, and we have to dilute the shareholding to cover our loss," said HMM's CEO Lee Paik Hoon, in a presentation to shareholders prior to the vote.
As Ship & Bunker previously reported, Kim Young-suk, South Korea's Minister of Oceans and Fisheries, publicly expressed support for HMM's restructuring plan.
On March 20, Kim is said to have dismissed the option of a merger between HMM and Hanjin Shipping Co. (Hanjin Shipping), explaining that "it is much more beneficial to maintain two major shipping companies than to reduce them to one by a forced merger."
State-run Korea Development Bank and other creditors are to decide whether to approve the proposal by March 29
Call for Government Support
In the latest of calls for the government support of South Korea's carriers, Ha Sung Min, chairman of the Federation of Korea Seafarers' Union, in a written statement urged the country's government and politicians to provide more support for local shipping firms in order to stablise employment for local seafarers.
"The current downturn in the shipping industry is not the problem of just one shipping company, but a structural problem afflicting the entire industry. CEOs are selling assets and resigning, so the situation is never good," said Ha.
Ha went on to request that the government adopt a protectionist attitude in regard to the import of iron ore, coking coal and thermal coal, noting that such shipments should be carried out only by South Korean shipping firms.
As Ship & Bunker reported earlier this month, Kim Young Moo, executive vice-chairman of the Korea Shipowners' Association (KSA) says the South Korean government is not doing enough to support shipowners' liquidity during the current challenging market, adding that with such support the struggling HMM and Hanjin Shipping could overcome their current crises.
