Hyundai Merchant Marine (HMM) will securitise its dedicated bulk services and overseas terminals in another effort to boost its liquidity.
South Korea’s second biggest shipping company said in a Korea Exchange on 6 October that it would divest its dedicated dry bulk shipping businesses and Hyundai Merchant Marine America, which wholly owns California United Terminal, Washington United Terminal.
The divested businesses will be amalgamated under Hyundai Bulk Line: an entity that HMM created on 23 September.
HMM and Hyundai Bulk Line will then issue what they call “Hybrid Convertible Bonds (CB)”.
Although HMM said the issuance of the bonds are still being planned, Korean media reports cited financial industry sources that claimed the issuance will be worth KRW310 billion (USD265.8 million).
The reports claim HMM would invest KRW60 billion in a private equity fund called H-Bulk PEF that would underwrite KRW200 billion of the Hybrid CB. The rest of the KRW110 billion worth of Hybrid CB would be underwritten by banks, according to the Korean reports.
The latest development comes after HMM failed to sell the two terminals and its dry bulk shipping business. HMM’s parent, Hyundai Group, is trying to raise at least KRW3.3 trillion after it fell into difficulties in 2013, following two consecutive annual losses and a prolonged stagnation in the shipping business. Hyundai Group has so far raised more than KRW2 trillion by selling majority stakes in Hyundai Securities and Hyundai Logistics to Japanese finance company Orix. HMM also divested its LNG shipping business for KRW1 trillion in April 2014.
A Korean shipping source that regularly charters ships to HMM told IHS Maritime that the company is still not in excellent financial health.
“So far there have been no payment issues,” the source said. “But HMM is not exactly in tip-top condition and as we speak, it still needs more cash injections. This is why HMM has been attempting various asset sales, as it must avert cash flow issues.”