HMM eliminates debt, shows signs of recovery

Hyundai Merchant Marine, the sole surviving national flag shipper, has strengthened its finances and businesses on the back of its debt restructuring efforts and creditor and government-led support programs.

The shipping line’s debt ratio, which topped 1,500 percent in 2015, was shaved to about 200 percent at the end of last year on its debt-restructuring plans including sales of its holdings in Hyundai Securities, data showed Tuesday.

HMM brought in roughly 1.2 trillion won from selling shares of the securities firm while making 1.4 trillion won ($1.06 billion) by converting debt into equity under creditors’ consent last year.

The improved finances motivated Korea Investors Service, a subsidiary under global credit rating company Moody’s, to raise the shipper’s credit rating from D, default to BB stable on Feb. 8.

“Its debt restructuring efforts have been paying off,” said Kim Yong-gun, an analyst from Korea Investors Service. “Also, since it is the sole global container shipping line, stable support from government and creditors are expected.”

“We believe the improvements will have a positive impact on a wide range of shipping line’s businesses,” a spokesperson from Korea Development Bank said.

The government-led Tonnage Bank, established in January to support shipping companies with a 1 trillion won fund led by Korea Development Bank, will inject roughly 720 billion won into HMM in a form of a ship sale-and-leaseback deal.

A separate shipbuilding fund involving Korea Trade Insurance Corporation, Korea Development Bank, Export-Import Bank of Korea and Korea Asset Management Corporation is also expected to help HMM order 10 new ships - five crude carriers and five 20-foot-equivalent unit (TEU) container ships - by the first half of this year.

Already HMM’s business has been showing a recovery.

According to Piers, a global trade tracker, HMM’s shipping volume from Asia to the U.S. West Coast has risen 55 percent year on year in January, pushing up its market share in the route from 4.9 percent in January 2016 to 7.5 percent this year.

HMM Chief Executive Officer Yoo Chang-keun is rather confident about the company’s business outlook. “We have fully recovered trust from our customers,” said Yoo, at a meeting with reporters on Tuesday.

Lee Sang-sik, head of the company’s container planning division also added its businesses have been boosted thanks to the improved credit ratings and its partnership with global shipping alliance 2M, which includes the world’s largest shipping line Maersk Line of Denmark. “Customers like Walmart don’t even invite shippers to their bidding if their credit rating is low,” Lee said.

The strategic cooperation takes effect in April. The partnership is expected to save on operations and increase service capacity on European routes.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]