Hyundai Merchant Shares Decline Amid Charter Rate Talks

By Kyunghee Park and Heejin Kim

(Bloomberg) — Hyundai Merchant Marine Co. fell the most in three weeks in Seoul trading on uncertainty over whether South Korea’s second-biggest container carrier would obtain deep discounts for rates on leased vessels in its negotiations with shipowners.

The company, battling losses caused by a slump in the industry, is seeking lower rates as part of conditions for a debt revamp plan agreed upon by lenders. Talks with shipowners are progressing well, said Lee Jun Ki, a spokesman at Hyundai Merchant. Main creditor Korea Development Bank has said Hyundai Merchant also needs to get its bondholders on board for the restructuring.

Shares of Hyundai Merchant dropped 7.6 percent to close at 12,850 won in Seoul, the biggest drop since April 18. The stock, the worst performer on the benchmark Kospi index Tuesday, resumed trading Monday after being suspended April 20 on the company’s plan to cut 86 percent of its capital.

“It’s uncertain whether the company could get large discounts in charter costs, or less than what it wants,” Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul, said by phone. “Even if they succeed in the negotiations, it would put pressure on shipping rates and eventually lead to a drop in its earnings.”

Hyundai Merchant is in talks with 22 shipowners. It paid 975.8 billion won ($833 million) in charter fees last year for 83 vessels leased.

All Efforts

With losses posted in five of the past seven years, the Seoul-based container carrier has been selling assets to reduce debt that had ballooned to almost 800 percent of its equity. Years of slowing global trade and overcapacity have depressed transportation rates, causing shipping lines worldwide to stem losses by cutting workers and consider consolidation.

Under the debt-overhaul plan in March, creditors agreed to extend maturity on loans for three months. Korea Development Bank said May 4 that the shipping company is in talks to reach agreements on the charter rates by mid-May. Support from creditors will be dropped if the two conditions aren’t met, the bank has said.

Hyundai Merchant is scheduled to hold a meeting with its bondholders on May 31 and June 1, it said in a regulatory filing Monday.

“We are making all efforts to reach agreements within the deadline schedule given by the creditors,” Hyundai Merchant’s Lee said.

© 2016 Bloomberg L.P