HMM: Joining THE Alliance ‘only a matter of time’

Troubled South Korean ocean carrier Hyundai Merchant Marine is disputing press reports that it might be required to merge with fellow state-run line Hanjin Shipping in order to gain entry into the new east-west vessel sharing agreement.    Troubled South Korean ocean carrier Hyundai Merchant Marine is again disputing press reports that it might merge with fellow state-run line Hanjin Shipping.
   Regional news outlet Business Korea reported yesterday that HMM may be forced to combine with Hanjin in order to gain entry into a new six-carrier east-west vessel sharing agreement called THE Alliance. In addition to Hanjin, THE Alliance currently comprises Hapag-Lloyd of Germany; Japan’s Mitsui O.S.K. Line (MOL), Nippon Yusen Kaisha (NYK) and Kawasaki Kisen Kaisha (“K” Line); and Taiwan-based Yang Ming.
   The Business Korea report cited an anonymous South Korean government official, who said there was only enough room in THE Alliance for one Korean line, but HMM issued a statement shortly thereafter saying the company thinks joining THE Alliance is only a “matter of time.”
   Reached for comment, the company said that although it does not respond to market speculations, “the alleged merger between HMM and another Korean shipping company is a groundless rumor.”
   The Korean Ministry of Oceans and Fisheries earlier this week issued a press release regarding the merger rumors in which it said “Hanjin Shipping and HMM are progressing with their restructuring process through charter negotiations and debt adjustment.”
   “Therefore, considering a merger between the two companies at this very moment is not only premature but also inappropriate,” it added, as there are “many significant and important discussions at present in order to normalize the companies’ businesses.”
   The statement from HMM came as it was wrapping up a series of five bondholder meetings during which the bondholders approved the company’s debt restructuring plan. The plan includes a debt-equity swap for over 50 percent of bondholder stakes – worth an estimated 680 billion won (U.S. $572 million) with the outstanding amount to be payable in three-year installments with a two-year grace period.
   The total amount of debt to be rescheduled is approximately 804 billion won, according to analyst estimates.
   Creditors including Korea Development Bank (KDB) approved the debt restructuring May 24, but KDB warned the debt-equity exchange would be nullified if HMM is unable to reach an agreement with ship owners to lower charter rates on leased ships. If those talks fail, the company may be forced to file for court receivership, but HMM said negotiations are “expected to reach a promising result soon.”
   “The investors were also briefed that there has been some significant progress in charter negotiations and this played a major role in leading them to agree on the suggested terms,” said HMM.
   “Given the promising circumstance, HMM expects that joining THE Alliance will only be a matter of time as the company’s charter negotiation is showing meaningful progress,” the company added.