Financially troubled Hyundai Merchant Marine Co. (HMM) has become a member of the world’s largest shipping alliance, 2M, having met all prerequisites set by its creditors to avert court receivership, the shipper’s main creditor said.
The state-run Korea Development Bank (KDB) said it has signed a memorandum of understanding (MOU) with 2M, adding that Hyundai Merchant will be able to operate under the alliance starting in April next year, if things go well.
“Following agreements with bond-holders to adjust debt and shipowners to adjust charter-hire, Hyundai Merchant Marine (HMM) has announced today that the company signed an MOU with the 2M Vessel Sharing Agreement (2M VSA) for providing joint service to begin from April 2017 upon finalizing negotiations and approval procedures in each country,” said an HMM official written statement July 14.
“The MOU signed between HMM and the 2M carriers is a binding agreement in regards to HMM’s entry to the 2M VSA,” it further declared.
In April, the carrier’s creditors, led by KDB, approved the shipper’s restructuring plan in return for the company meeting three key conditions—a debt recast, a charter rate cut, and inclusion in a global shipping alliance.
Earlier, Hyundai Merchant said its talks to be part of the 2M, comprised of A.P. Moller-Maersk A/S and Mediterranean Shipping Co., had made significant progress. The 2M alliance controls about a third of the Asia-Europe trade route, the world’s most lucrative.
Hyundai Merchant was left out of a new global shipping alliance formed recently by six Asian and European container-shipping operators to challenge the dominance of 2M. Hyundai’s compatriot, Hanjin Shipping Co., is part of the six-member group, called “THE Alliance.”
Hyundai Merchant has reached an agreement with owners of its chartered ships to cut leasing rates by slightly over 20%.
Also, bondholders of HMM approved a KRW804.2 billion (US$710.2 million) debt rescheduling proposal, under which more than half of its debt will be swapped for the shipper’s stocks and the remaining debt will be paid back in two years.
The creditors also agreed to swap KRW680 billion worth of debt for the shipper’s stocks as part of an effort to keep it afloat.
Meanwhile, the shipper proposed selling stocks worth KRW2.49 trillion this month, which includes KRW1.9 trillion worth of debt-for-equity swap.
Of the proposed amount, some KRW1.9 trillion, or 76%, is part of a debt rescheduling scheme agreed upon with creditors, bondholders, and the owners of chartered fleet.
After the stock sale, KDB-led creditors will emerge as the No. 1 shareholder in the shipping line with some 40%, in effect making Hyundai Merchant a state-owned company.
Hyundai has paid close to $1 billion a year in charter fees for 83 vessels leased from independent overseas shipowners. It operates a total of 116 vessels.
“By accessing 2M VSA network, HMM will be able to strengthen its service offering and achieve improved cost competitiveness. The 2M carriers will benefit from a reinforced service competency in Asia and improved network cover in the trans-pacific area,” said the company.
It added that the carrier will “continue increasing operational competency in the second half of this year to continue improving profitability of our company.”
Photo: Hummelhummel
