News Content

Hyundai Merchant Marine charter talks end badly and receivership looms

HYUNDAI Merchant Marine (HMM) is likely to go into receivership, after the shipping line decided to call off charter rate re-negotiations with its tonnage providers, reports IHS Media.

HMM sought a 30 per cent reduction in charter rates to trigger a Korea Development Bank debt-for-equity swap, but tonnage providers would only offer 15 per cent, because of their own financing was dependent on revenues from long-term timecharters.

Thus, talks with Danaos, Capital Ship Management, Navios and Eastern Pacific ended without positive result.

Said Korea's Financial Services Commission (FSC): "HMM and KDB have been doing their best to successfully conclude the negotiations. We do not have the luxury of time to continue.

"To extend the charterhire re-negotiations indefinitely would also hold up HMM's restructuring, and this is not viable. We thus took the decision to call off the negotiations.

The FSC acknowledged that given HMM's massive debts, the company's prospects do not look good.

"The failure to nail down a discount in charter rates means that realistically, it would be difficult to facilitate the normalisation of HMM's operations," it said.

"On the other hand, having mobilised all resources towards achieving discounted charterhires, now that the negotiations have fallen through, HMM's creditors do not have much of a choice.

HMM is still set to was to meet holders of bonds maturing in 2016 and 2017 on May 31 and June 1, to persuade them to extend the maturity.

As at March 31, HMM had a working capital deficit of KRW2.46 trillion (US$2.06 billion). With long-term debt is KRW1.75 trillion and shareholders' equity falling to KRW44.78 billion.

HMM's net loss in the first quarter 2016 (1Q16) widened to KRW276.68 billion (USD232.77 million), from a KRW49.79 billion net loss in 1Q15, as revenue fell 18.8% year on year to KRW1.16 trillion.