Hyundai Group faces a downgrade

Hyundai Group, once the country’s biggest conglomerate, will likely be downgraded to a medium-size firm once restructuring plans for shipping affiliate Hyundai Merchant Marine (HMM) go through.

Under current assessments, the Free Trade Commission (FTC) categorizes large business groups as conglomerates when their combined assets exceed 5 trillion won ($4.25 billion).

During its board meeting on Friday, HMM, the biggest affiliate under the Hyundai Group banner, proposed a capital reduction without a refund for Hyundai Group, which will be voted on by the shipping company’s shareholders.

The move is part of the company’s restructuring plans to reduce its debts.

After the approval, the stake held by HMM’s largest shareholders, including Hyundai Group Chairwoman Hyun Jeong-eun, will be reduced from 22.6 percent to 4 percent, depriving Hyundai Group of its control over the troubled affiliate.

This is not the first time a major affiliate has been separated from Hyundai Group.

Last month, Hyundai Securities along with other two financial affiliates were acquired by KB Financial Group. Hyundai Securities, the group’s second-largest affiliate, issued a statement last month saying its largest shareholder has gone from HMM to KB Financial Group.

According to data compiled by the FTC last year, HMM’s asset size stood at 6.7 trillion won, while that of its financial affiliates was 3.4 trillion won.

If these affiliates get removed from the group’s portfolio, Hyundai Group’s asset size will shrink to 2.7 trillion won. After the restructuring plans finish, Hyundai Group is planning to focus on its elevator business.

Hyundai Elevator, the nation’s No. 1 elevator operator, recorded its highest-ever sales and operating profit last year. Hyundai U&I, the information technology outsourcing unit of the group, is another business the group intends to boost into a main strength.

But other than Hyundai Elevator, none of its affiliates’ assets surpass 400 billion won.

The approval of the capital reduction plan will be announced in mid-July.

Once confirmed, Korea Development Bank will become HMM’s largest shareholder. Bondholders and foreign shipowners will each hold a 20 percent stake in the company.

BY MOON HEE-CHUL [jin.eunsoo@joongang.co.kr]