South Korean mainline operator HMM is issuing KRW720 billion (US$592.3 million) in convertible bonds, raising funds for capital investments in new containers as well working capital for the company.
The bonds will be issued to its largest shareholders, Korea Development Bank (KDB) and Korea Ocean Business Corporation (KOBC). The funds will finance capital investments, including ordering new containers at KRW400 billion (US$329 million). Another KRW320 billion (US$263.1 million) will be used as working capital to pay for bunkers and charterhire.
HMM said that it plans to spend KRW114.3 billion (US$94 million) on ordering 48,980TEU of new containers. The containers will be on long-term lease, from 29 April 2020 to 31 July 2027. A special purpose vehicle, KOBC Container Leasing No.2 Limited, has been created to be the container lessee.
HMM will take delivery of a dozen 24,000TEU container ships from Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries from April, as the company becomes part of THE Alliance.
The Hyundai group had entered into a debt-for-equity swap with HMM’s lenders after the liner operator completed a self-rescue effort in 2016. Even then, profitability has been elusive, with HMM suffering a fifth straight loss in 2019.
The bond issuance will be equally split between KDB and KOBC. The latter is a ship finance institution that was set up in 2017 as part of the government’s plans to revitalise South Korea’s battered maritime industry.
The bonds bear an interest rate of 3% per annum and mature on 23 April 2050. The bonds can be exchanged for HMM shares, at a conversion price of KRW5,000 (US$4.11) per share.
HMM said, “Issuing the bonds enables us to undertake capital investments while improving our financial structure. With the funds, we can secure the number of containers needed in the near term.”
Martina Li
Asia Correspondent
