A statement released by HMM and its main creditor, state-owned Korea Development Bank (KDB), said that despite the creditors’ rejection of debt rescheduling at a meeting today, HMM and KDB planned to enter into a voluntary agreement (VA) on 29 March after consulting with other creditor banks on 22 March.
The VA would include a three-month maturity extension of the principal and interest on HMM’s debts and “debt readjustment planning”, which would be based on “due diligence conducted by an external accounting firm”.
KDB said: “Creditor banks will use their upmost endeavours to minimise losses for all interested parties and normalise HMM’s management.
“We ask all interested parties for full understanding and co-operation as their participation to share the burden is the only possible measure to normalise HMM.”
The statement added that a negotiated debt adjustment with non-agreement creditors, as well as continued negotiations with shipowners to reduced charter hire payments, “will gain a high degree of momentum” from the VA.
A crucial element of HMM’s self-assisted recovery plan was a significant decrease in its charter hire payments to shipowners.
However, according to a source close to a shipowner, the negotiating team representing HMM flew back to Seoul from London early this week “virtually empty-handed”.
The procurement officers, together with advisor Millstein & Co, began talks with shipowners on 22 February in a bid to reduce its charter hire bill by between 20% and 30% ahead of the creditors’ meeting.
In a letter to shipowners dated 1 February, HMM chief executive Paik Hoon Lee threatened that unless charter hire reductions were obtained, HMM would seek court protection under Korean bankruptcy laws, which he said was “virtually certain to result in a substantially less favourable outcome”.
HMM currently has 33 ships on charter, including five 13,100 teu vessels on hire from the Danaos Corporation on a fixed-rate time charter until 2024 and deployed between Asia and North Europe within the G6 alliance.
London-based Zodiac Maritime Agencies not only has existing ships chartered out to HMM, but is scheduled to deliver six 10,000 teu newbuild ships to the Korean carrier this year on 12-year fixed-rate time charters.
The second vessels in the series, the 10,055 teu Hyundai Mars, was received by HMM last week and immediately deployed between Asia and the US west coast.
Danaos and Zodiac will now have to await the outcome of the next round of creditors’ meetings and the VA to learn how they will be affected. It could be that in the absence of an agreement, the creditors will decide arbitrarily on charter hire reductions.
In this instance, the shipowner, under the terms of the charter party, has the right to withdraw the ship from hire until the full payment has been made.
Meanwhile however, after losing another $500m in 2015 and industry conditions in the first quarter 2016 amongst the weakest for many years, HMM’s cashflow will be under severe pressure, which could cause it to default on charter hire payments that are generally made every two weeks.
Notwithstanding its own problems, the impact of HMM’s financial crisis is likely to affect the other members of the G6 alliance and there will be continuing concerns among partners as well as customers that shippers will choose not to ship on an HMM vessel in case the ship or containers are subject to arrest by creditors of the carrier.