Deadlock looms over $4.9 billion HMM sale as negotiation deadline nears

Unionized members of HMM picket on a vessel to protest Harim Group's plan to acquire the shipping company. [HMM LABOR UNION]

The once-delayed 6.4 trillion won ($4.9 billion) sale of HMM, the country's largest shipper, faces a deadlock as primary creditors and the preferred bidder — a consortium of Harim and JKL Partners — remain at odds over acquisition conditions ahead of Tuesday’s negotiation deadline.

Reports suggest that the Harim-led consortium has withdrawn its demand for a three-year deferral in the conversion of perpetual bonds into equity post-purchase. The negotiation deadline was initially set for Jan. 23, but after failing to reach an agreement, it was extended until this Tuesday.

However, a discrepancy persists concerning another demand — limiting the validity period of the sale agreement.

After this validity period, all clauses, including restrictions on HMM's cash dividends, a ban on selling stakes for a specified time, and the government's right to appoint HMM's outside directors, would be nullified.

Harim is reportedly pushing for a five-year limit on the validity period, as JKL Partners, acting as a financial investor, requires the recovery of investment funds after a specific period.

The government emphasizes the need to safeguard HMM's 14 trillion won cash assets from being used beyond the shipping industry.

Both parties declined to confirm specific negotiation details, while they expressed commitment to reaching an agreement and signing the deal.

The challenging shipping industry situation, compounded by threats in the Red Sea area by Yemen's Houthi rebels, has prompted shipping companies to choose detours around the Cape of Good Hope's southern tip, causing a surge in freight rates.

Major global carriers, including HMM, are consequentially benefiting, reminiscent of the post-Covid-19 pandemic era. Industry insiders caution that the prolonged logistical crisis may increase HMM's reserve funds, already reaching 10 trillion won, intensifying the financial burden on Harim, financially smaller compared to HMM. HMM's union earlier raised concerns about Harim potentially using the substantial cash reserves as part of the acquisition payment.

Industry insiders cite potential acquirers in the event Harim's acquisition falls through, including Dongwon Group and LX International, which previously participated in the HMM acquisition deal.

Hanwha Ocean is also being considered a potential candidate in the circle, after it disclosed that it is "exploring various options regarding maritime business, including the establishment of an environmentally friendly shipping company" in a regulatory filing on Jan. 29.

BY SEO JI-EUN, CHOI SUN-WOOK [seo.jieun1@joongang.co.kr]