Troubled Hyundai Group unloads LNG cash cow

The great Hyundai Group sell-off continues.

Hyundai Merchant Marine (HMM), an affiliate of Hyundai Group and the country’s second-largest shipper, said yesterday that a local investment firm has been selected as the preferred bidder for its liquefied natural gas (LNG) transport business. The company aims to complete the sale in the first half of this year.

“We recently began the bidding process to sell our LNG transport business, and last Thursday we received letters of intent from six candidates,” the company said in a statement yesterday. “We selected IMM Investment as the preferred bidder.”

The sale price is expected to be 1.1 trillion won ($1.04 billion), the company said.

The sale is part of efforts by HMM and its owner, Hyundai Group, the country’s 20th-largest conglomerate, to raise capital to improve its fiscal health and overcome a liquidity crunch. It is part of the conglomerate’s self-rescue plan that was announced in December to raise 3.3 trillion won worth of capital by selling financial affiliates, including Hyundai Securities, Hyundai Asset Management and other assets.

Concerns have been raised over the financial soundness of Hyundai Group affiliates - mainly HMM - as debt keeps mounting amid a sluggish economy.

HMM’s LNG-transport business is considered a cash cow as it includes a long-term distribution contract with Korea Gas Corporation that ends in 2028. Its 10 carriers have been transporting 7.3 million tons of LNG to Korea, which is around 20 percent of the country’s total demand.

The slump in the global shipping industry has particularly affected HMM’s profit, with its debt-to-equity ratio surging to 992.6 percent as of September, last year. The company has been in the red for a third consecutive year after posting a net loss in 2011.

“The latest sales allow us [HMM] to considerably resolve liquidity problem,” the company said.

In December, HMM was also able to raise 56.3 billion won by selling 18,097 containers and 46.5 billion won by selling its 1.13 million shares in KB Financial Group. As a follow-up measure, the company announced last month that it plans on securing another 93 billion won by selling other stocks it owns in the first half of the year and another 70 billion won by selling land where Yongdang Dockyard is located in Busan.

“We’re sad that we have to let go of our essential LNG transport business,” the company said, “but we believe it is the best choice to show how determined we are to recover the market’s trust.”

BY lee eun-joo [angie@joongang.co.kr]