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Hyundai Merchant Marine needs help from charter parties to survive

TROUBLED Hyundai Merchant Marine (HMM), having made money in asset sales, now looks for a break from charter parties to reduce for their daily hire rates.

HMM has begun a second round of talks with shipowners on reducing the terms of charters, a crucial move if it is to restructure under its voluntary agreement (VA) status with creditor banks.

During this period, the creditor banks intend to establish a debt restructuring plan for HMM, after due diligence conducted by an external accounting firm.

HMM has improved its balance sheet with the sale of its dedicated dry bulk business, its stake in Hyundai Pusan New-port Terminal and its share in Hyundai Securities.

The Hyundai Securities sale to Korea's KB Financial Group was said bring in US$860 million, three times its equity value, reported London's Loadstar.

Last month Danaos said it was at risk of having to restructure debt if HMM is forced to, reported American Shipper. While not willing to reduce its charter terms, it is willing to end contracts for a price, said the report.

"It will have a significant impact on our ability to service our indebtedness," said Danaos in a filing with the US Securities and Exchange Commission.

"If Hyundai fails to meet its obligations to us as part of a court-led restructuring, we could sustain significant reductions in revenue and earnings which could have a material adverse effect on our business," said Danaos.

Danaos currently has 29 panamax and 26 post-panamax vessels chartered out, with an average remaining length of hire of 7.2 years.

This equates to $3.2 billion of revenue, with HMM representing 28 per cent followed by CMA CGM at 26 per cent and Hanjin at 17 per cent.