Hyundai Merchant Marine’s principal lender, state-owned Korean Development Bank, has provided a backup plan as a reaction the appeal for patience in its current cash flow crisis.

CEO Paik Hoon Lee from Hyundai Merchant Marine stated the company had sold off plenty of its assets to raise bridging finance until the HMM restructuring plans bears fruit. HMM has made a deal to sell its bulk dedicated business for US$100 million while Hyundai Group chairwoman Hyun Jeong-eun will donate US$25 million of her personal funds through a third-party allotment.

Mrs Hyun and her mother Kim Moon-hee will buy KWR30 billion in newly issued shares. Also sold is Hyundai Securities and well as the settlement for charters and debts.

Hyundai Merchant Marine stated : “We have decided to raise share capital by issuing six million shares through a third-party allotment,” The statement continued by saying : “After all this was put in place, KDB closely reviewed our additional restructuring plan with the accounting first ‘Deloitte’ who had a common understanding of our efforts to execute the restructuring plan,”

Korean Development Bank declared that after thorough review, Hyundai Group’s plan had been deemed viable and trustworthy, and capable of substantially helping HMM to recover its financial structure and achieve normalization if well-implemented.”

Hyundai Merchant Marine relies on Korean bank for liquidity problem 1

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Reduction of fleet rates

In light of the cash flow crisis, HKM has asked the owners of its chartered fleet to substantially cut their rates.  In a letter, Lee Paik Hoon said the operator faces huge challenges as falling Chinese and European demand, combined with an excess of ships in the water, has battered freight rates. Hyundai and bigger rival Hanjin Shipping Co. move most of Korea’s exports.

“HMM has been particularly challenged by these developments and by the fact that the payment of charter hire at the rates called for by its time charters has not only resulted in significant losses to date, but guarantees that HMM will continue to incur substantial losses from the operation of its business–and this is so before taking account of debt service or other financing costs,” the letter said, according to shipowners that received it.

“As a consequence of this, and despite the implementation of drastic cost-cutting measures, HMM’s liquidity position has continued to deteriorate to the point where it cannot continue to operate much longer without substantial relief from the shipowners, which own and operate vessels time chartered to HMM, and from its creditors,” the letter said.

Insiders claimed some creditors are requesting HMM a reduction of its cost for charters by up to 30% as a prerequisite for debt restructuring. The company currently pays more than $1.5 billion a year to charter vessels from independent owners.