HMM: Here is the rescue plan progress report

Hyundai Merchant Marine has made progress in the plan to rescue the company from bankruptcy, informs the shipping group. Crucial negotiations with carriers are speeding up, according to the carrier.

Photo: Hyundai Merchant Marine

Hyundai Merchant Marine (HMM) has reached a turning point in the efforts to save the South Korean shipping group from a collapse, informs HMM after the company recently signed a voluntary agreement with its largest creditor Korean Development Bank (KDB) and other banks for the postponement of interest payments and other payments for three months. Previously, the creditors' demand had been that all of the requirements in the HMM rescue plan had to be met before any type of relief could be provided.

"However, they decided to take the agreement forward in order to actively support HMM's stabilization as well as accelerating the charter cut negotiations and the restructuring of debts under non-agreement," HMM writes in a statement where the group presents the lay of the land in the process of salvaging the company.

Meanwhile, the credit banks, according to HMM, are establishing a special plan to restructure the company's debt, when an external accounting firm has concluded a due diligence process. A significant part of the plan for HMM concerns contracts with foreign carriers that have chartered vessels to HMM, as the container market in particular looked very different at the time. These deals must be reduced. Big-time.

HMM has previously pointed out that the charter contracts were fixed at levels upwards of 150 percent higher than the current market. Negotiations with the foreign shipowners look to be progressing, and Hyundai Merchant Marine has been able to secure a deal to reduce rates with one of the shipowners, reports Alphaliner. What this specifically entails is not clear, but Greece's Danaos in particular has a significant number of container vessels on charter with the Korean carrier. The same goes for Zodiac Maritime, Eastern Pacific Shipping, Navios and Capital Ship Management, though not as many as Danaos, according to Alphaliner.

Kicking off the second round

The first round of the negotiations began after HMM in early February sent a letter to its partners, and the letter made it abundantly clear how serious the company's problems were. The situation was so dire that HMM would go bankrupt unless the contracts were reduced significantly, informed management in the letter.

"Recently, HMM has made some significant progress on its first round of charter cut negotiations with foreign shipowners. HMM is going to start the second round of meetings after discussing the terms, suggested by the shipowners regarding compensations, with KDB, and is expecting that the shipowners will agree on charter reduction," writes HMM on Wednesday.

HMM uses this number to put pressure on partners

Even though the process is advancing, all the problems are far from solved. At a major creditor meeting on March 17th, Hyundai's bond holders rejected a proposed deal to postpone the group's debt obligations. However, Hyundai plans to hold a new meeting with all the public bond holders. The carrier is facing repayment of two bond loans at USD 190 million and USD 257 million in April and July, respectively. And HMM does not hide the fact that the payment in April will not be possible.

"In contrast to the last bondholders meeting, we believe it is highly likely that the public bond holders will agree on the bill as HMM is offering a solid plan regarding debt restructuring by signing this voluntary agreement," says an HMM official in the statement.

Divestments continue

Meanwhile, the efforts to raise capital by selling off part of the business will continue. In late March the group finalized the sale of part of its dry bulk dedicated business for USD 100 million, while the formal contract with PSA to sell 40 percent Hyundai Pusan Newport Terminal for USD 69 million was recently settled. The sale will be completed in April. And the buyer of Hyundai Securities will be announced on Friday, with the contenders here being KB Financial Group, Korea Investment Holding and the Hong Kong-based equity fund AKTIS, all of whom have bid on the company. This sale is expected finalized in July.

"As the creditor banks are about to establish the plan for stabilization of HMM for the next three months, a firm foundation will be set to drive HMM to become a sound company from the beginning of the second half of 2016," HMM writes.

Read more about Hyundai Merchant Marine (HMM)

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