Hyundai Group selling LNG business to pay debt

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Hyundai Group selling LNG business to pay debt

Hyundai Group, the nation’s 21st largest conglomerate, which is suffering a liquidity crunch, is preparing to pay back debt after its affiliate Hyundai Merchant Marine (HMM) sells its liquefied natural gas transportation business for 1 trillion won ($968 million).

In December, the conglomerate run by Chairwoman Hyun Jeong-eun, announced a voluntary debt restructuring program to generate 3.3 trillion won by selling assets. Its liquidity crunch is largely due to a slump in sales from the nation’s second largest shipper, HMM.

HMM said it signed a contract for LNG transportation with IMM consortium, which is led by local private equity firm IMM Investment, on Wednesday night. The deal will be approved at a company board meeting.

HMM and the consortium will set up a new company called Hyundai LNG Shipping Corp. and the new group will buy HMM’s eight LNG carriers and its stake in two LNG carriers operated by other companies for 1 trillion won.

The new entity will take on HMM’s 500 billion won worth of debt and pay 500 billion won to HMM in June.

HMM said the deal will lower its debt ratio significantly. At the end of last year, HMM’s debt-to-capital ratio reached 1,185 percent, but after the deal is finalized, its debt ratio will fall below 650 percent.

The sale of HMM’s LNG transportation business was an important part of Hyundai’s debt clearance program. The shipper has a transportation contract with Korea Gas Corporation through 2028 and has been delivering 7.3 million tons of LNG every year, accounting for 20 percent of the country’s LNG demand.

With the deal, Hyundai has secured nearly 2 trillion won, completing 60 percent of its debt restructuring plan announced last year.

“As we complete the sale of our LNG transportation business to improve our financial conditions and carry out our debt restructuring plan, we want to recover our trust and credit in the market,” Hyundai said in a statement.

Of all conglomerates that have announced debt restructuring plans recently, Hyundai has been the fastest to execute its. Hanjin is currently looking to sell its 30 million shares of S-Oil, Korea’s third largest oil refiner, while Dongbu is struggling to find a buyer for its Incheon plant.

In the past four months, Hyundai has been busy selling assets, most of which are from HMM. The group has sold HMM shipping containers and its shares in Shinhan Financial Group, Hyundai Oilbank, and Busan New Port Terminal.

It has finalized the sales process of its three financial affiliates and is working to sell a property in Yongdang-dong, Busan, and Banyan Tree Club and Spa, a luxury hotel in central Seoul.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]


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