The South Korean state could increase its stake in HMM to 72%, as the country’s flagship carrier will repay all outstanding convertible bonds held by Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC).
HMM, formerly Hyundai Merchant Marine, came under state control in 2016 after its lenders , led by KDB, swapped debt for equity to save the company from bankruptcy.
Today, KDB and KOBC, a ship finance institution, hold a combined 67% of HMM, which has said it will repay the bonds by the middle of this month.
The 30-year bonds were issued in April 2020, when the Covid-19 pandemic sparked fears of an economic collapse and the impact on shipping companies. The amount to be repaid is KRW720bn ($487m).
A HMM spokesperson told The Loadstar the company was able to exercise a call option to repay the bonds 25 years before the maturity date, thanks to a string of good financial results since the pandemic. As of 31 December, HMM had KRW1.47trn ($1bn) of cash holdings.
The spokesperson added: “Under the step-up clause, the interest rate has increased from 3% to 6%. Given our currently robust cash reserves and liquidity, we have decided to repay the bonds.
“However, the decision whether to convert the bonds into shares is at the discretion of KDB and KOBC.”
Estimates show a 72% stake in HMM could be worth KRW11trn ($7.4bn), and this staggering amount could further impede any attempts to find a new owner for the company .
In December 2023, a consortium, comprising poultry processor Harim Group and private equity player JKL Partners, was named the preferred buyer for HMM. But differences over the selling price and management rights eventually thwarted the sale.
The government appears to be sending mixed signals about its sincerity in finding a buyer, the chairs of KDB and KOBC recently expressing a desire that HMM should have “a suitable owner that can take the company to further heights”.
It is understood that the new owner should be one of South Korea’s chaebols, as foreign ownership is viewed as politically unfeasible.
However, the state’s growing interest in HMM is expected to discourage any buyer from committing.
