Asia/Pacific News
Hanjin and HMM Can Overcome Crises Without Additional Funding: KSA
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, but with such support the struggling Hyundai Merchant Marine (HMM) and Hanjin Shipping Co. (Hanjin Shipping) could overcome their current crises, IHS Fairplay reports.
"By securing more liquidity, Hanjin Shipping and HMM should solve their most pressing problems," said Kim.
"If the government and the policy lenders agree to extend the maturity of KRW676.6 billion ($570 million) worth of corporate bonds that are maturing this year, and swap KRW1.2 trillion ($1 billion) of debts for equity, Hanjin and HMM can overcome their crises without additional funding."
Kim notes such government support is not unusual, citing examples such as that given by China during the 2008 financial crisis.
"In order for South Korea's shipping companies to get back on their feet, it's important that the government and policy lenders clarify their position with regards to rescuing the companies," said Kim.
As Ship & Bunker reported in January, the South Korean government announced a $1.2 billion investment fund intended to provide support to the country's shipping industry, but Kim says funding avenues such as this have proved insufficient to meet Hanjin's and HMM's financing needs.
As a result, companies are said to have looked toward the bond market to raise more funds, only to find themselves restricted by maturing bonds' high interest rates in the context of a worsening market situation.
The Export-Import Bank of Korea, one of the largest creditors for South Korea's highly leveraged shipping companies, is said to have agreed not to act against domestic shipowners who have incurred loan-to-value covenant breaches for one year, expressing hope that the country's other banks would follow suit.
A HMM spokesperson was quoted by Fairplay IHS as saying "HMM agrees" with Kim in his views," while a Hanjin Shipping spokesperson said the two companies are "struggling, and so are several others."
"We're doing all we can to raise money, and KDB (Korea Development Bank) is also looking at what it can do to help indebted companies."
In November, Ship & Bunker reported that the South Korean government was downplaying claims that it was looking to force a merger between HMM and Hanjin Shipping.
Ship & Bunker reported last week that Drewry Maritime Equity Research (Drewry) says a HMM merger with compatriotHanjin Shipping would boost their chances of survival.
