SEOUL, May 18 (Yonhap) — Financially ailing Hyundai Merchant Marine Co. and the owners of ships that it leases on Wednesday failed to reach an agreement over a cut in charter rates as the shipper faces risks of being under court receivership, company officials said.
Hyundai Merchant and high-ranking officials from five major shipowners held their talks over the charter rate cut in downtown Seoul earlier in the day, which is crucial to the South Korean shipper’s fate.
The country’s No. 2 shipper has been under severe financial strains in the face of falling freight rates amid a protracted slump in the world’s economy.
Since February, Hyundai Merchant has been in talks with shipowners to cut the rates.
Last month, the creditors gave the nod to the financially troubled Hyundai Merchant’s self-rescue plans, including asset sales, on the condition that it should complete renegotiations with the owners of chartered ships to lower their charter rates by 28 percent on average by the middle of May to stay afloat and implement far stronger self-rehabilitation measures.
The creditors have warned that they will put Hyundai Merchant under court receivership if there are no “meaningful” results from the negotiations, according to industry sources.
Hyundai Merchant reportedly made a proposal to the shipowners that half of the lowered charter rates will be compensated through a swap with the shipper’s stocks.
Hyundai Merchant Marine employees walk past a company signboard at its parent Hyundai Group’s headquarters in downtown Seoul.
The shipper’s creditors also offered to swap their loans worth 700 billion won into its stocks as part of debt recast efforts, which many believe will help the owners of chartered ships back the rate cut.
But the shipowners are known to be reluctant to slash the rates on concerns that other shippers would make a similar demand and investors and shareholders could oppose it.
“It is true that the negotiations are not easily proceeding,” said a government official.
But the financial watchdog and the creditors believe that the negotiations are not over, according to the sources.
Stocks of Hyundai Merchant closed at 13,300 won on the Seoul bourse, up 8.57 percent from the previous session’s close, marking a rise for the second consecutive day.
Financial authorities and the government believe that Hyundai Merchant and its bigger local rival Hanjin Shipping Co. are under contract to pay charter fees four to five times higher than the current rates by 2026.
In the shipping industry, freight charges have dropped more than 25 percent from the end of last year, further hurting the bottom line of shipping lines.
South Korea’s two largest container carriers posted massive losses in the first quarter, hard hit by plummeting freight rates.
Hanjin, the bigger shipper by revenue, swung to a net loss of 261 billion won (US$221 million) on a consolidated basis in the first three months of this year from a year earlier.
Its revenue fell 25.1 percent on-year to 1.59 trillion won, and it suffered an operating loss of 115.7 billion won.
Hyundai Merchant also recorded 276.1 billion won in net loss during the January-March period, with sales declining 18 percent to 1.2 trillion won. The company also suffered an operating loss of 163 billion won.
Hyundai Merchant said that it plans to hold a conference call on Thursday to discuss details over the charter rate cut with all shipowners.
Source: Yonhap News Agency
Source: Yonhap News Agency