HMM Restructuring Takes Center Stage, Seeking Solutions of their Own

Source: www.joc.com

The recent, surprising financial struggles of Hyundai Merchant Marine (HMM) have been well-documented over the past few months and have put industry competitors, experts, and consumers on high alert. If HMM continues to operate at a loss, there will be major shifts in the freight forwarding landscape along the trans-Pacific network – many vendors have already began stating their reluctance on using HMM as a carrier.

Through the support of the banks and its bondholders, HMM has begun the normalization of its business. As of today, South Korea’s carrier has already completed three of its five meetings with bondholders to renegotiate credit terms, and HMM indicated that the meetings have been very successful.

According to reports, the bond values in the past meetings were at 240 billion South Korean won ($201.96 million), 60 billion won, and 330 billion won. For its next two bondholders meetings, the bonds up for negotiation are valued at 120 and 54.2 billion won. HMM’s debt adjustment plan offers debt-for-equity swaps for over 50% of the bonds and claims the remainder to be paid off within five years (three annual installments after a two-year grace period).

HMM has also been working with its tonnage providers, stating that they are close to reaching an agreement that will cut charter costs by 30 percent. The success of this agreement goes hand-in-hand with the bondholder meetings, as it is a major factor in the refinancing and normalization of HMM’s business. Korea Development Bank (HMM’s largest creditor) and others are invested in the success of this agreement, hoping to swap 680 billion won in debt for equity.

In this past first quarter alone, HMM had a loss of 276.68 billion won and had a working capital deficit of approximately 2.46 trillion won. Despite selling its stakes in multiple divisions (Hyundai Logistics, Hyundai Securities, etc.), the company continues to carry a long-term debt of 1.75 trillion won and a shareholders’ equity of 44.78 billion won, leading to an exceptional gearing ratio of 39:1. Unfortunately, HMM’s capacity to stay afloat will be determined by how quickly the company can shed the weight of its debts.

SOURCE: www.joc.com

Additional Information:

Hyundai Merchant Marine Holds Bondholders Meeting For Debt Recast (News United)

HMM Secures Vital Agreement with Bondholders (Shipping Watch)

HMM Fulfills Preconditions for Meeting with Bond Holders (IHS Fairplay)

Hyundai Merchant Marine Says It Will Join New Alliance After Restructuring (Vessel Finder)

Hyundai Merchant Marine Makes Progress in Chartering Fee Deal: FSC Chief (Pulse News)

SOLAS Proposal Motivates Discussion between U.S. Ports and Carriers

Source: www.joc.com

With the SOLAS proposal fast approaching, carriers are working quickly to rework their procedures and find quick solutions to the upcoming changes. Beginning July 1st, all carriers must provide documentation of the containers’ verified gross mass (VGM) to the terminal and port of which they’re leaving from. This has led six U.S. ports and nineteen ocean container lines to cooperate in finding a unified strategy to tackle the new container weight rule.

Together with the Ocean Carrier Equipment Management Association (OCEMA), the respective ports and carriers have asked the U.S. Federal Maritime Commission for permission to enter a discussion agreement that allows for sharing of “information and data relating to…container weight information.” This is widely considered as an unprecedented effort between the six major operating ports and the carriers – they are hoping that the results will serve as a framework for everyone affected by the soon-to-be implemented VGM rule.

The main idea behind the discussion agreement is to utilize pre-existing procedures to satisfy the VGM documentation requirement. There are already container weight regulations established by the Occupational Safety and Health Administration (OSHA); if those involved in the discussion agreement can work out the details of the current procedures, thus effectively eliminating the additional step brought forth by the SOLAS proposal. This also can reduce possible supply chain logjams while cutting costs and resources.

All parties involved are looking forward to the discussion agreement, because it will minimize the impact the SOLAS proposal has on current procedures. Currently, the agreement parties include the port authorities of Georgia, N. Carolina, S. Carolina, Virginia, Houston, and Massachusetts, as well as 19 container line members of OCEMA. The former four ports have offered to provide container weight services to exporters at no cost, while the Port of Houston has said it “will deny access to its terminals for containers that arrive without electronic documentation of their verified gross mass.” Massport, however, has not disclosed its VGM policy. Ultimately, the likelihood of being able to kill two birds with one stone rests on the approval by the U.S. Federal Maritime Commission.

SOURCE: www.joc.com

Additional Information:

Ocean Carriers Seek Agreement With Ports on Container Weights (WSJ)

NEWS FLASH: OCEMA, Six Ports Collaborate on VGM (American Shipper)

OCEMA Encourages Collaboration to Confront VGM Compliance (Logistics Management)

THE Alliance Emerges from Scramble as HMM Continues To Struggle

Source: www.lloydslist.com

Amidst the alliance scramble that began in April, a new alliance has developed between six carriers. Known as “THE Alliance”, the efforts to form this alliance was led by German carrier Hapag-Lloyd and includes Taiwan carrier Yang Ming, South Korean carrier Hanjin, as well as the Japanese carrier trio K Line, NYK, and MOL. This five-year agreement is expected to take effect beginning April 2017.

It is important to note that former alliance carriers HMM and UASC were notably missing from this newly-formed alliance. However, the more-than-likely merger between Hapag-Lloyd and UASC is all but a guarantee that the Dubai-based carrier will join the alliance soon. Rolf Habben Jansen, the chief executive of Hapag-Lloyd, briefly discussed this topic, mentioning that “it is anticipated that UASC will become part of THE Alliance”.

Major concerns regarding the South Korean carrier HMM have developed further after news of this alliance broke out. The financially-struggling carrier issued a statement regarding its absence from THE Alliance, stating that the alliance is “tentative by its nature, and its member companies are yet to be finalised.” The carrier is looking to join the alliance in early June, following the scheduled completion of the company’s business normalisation.

HMM’s main creditor, Korea Development Bank (KDB), testifies to this notion, stating the HMM’s membership in THE Alliance is simply being postponed and that the carrier remains to have the bank’s full support. KDB have been actively appealing to all groups, including stakeholders and other financial institutions, to “join hands supporting HMM”, insisting their cooperation is essential to the success of the debt-ridden HMM. As the landscape of the industry continues to shift, all eyes are on HMM to see what actions the carrier will take in order to stay afloat and find success again.

SOURCE: www.theloadstar.co.uk

Additional Information:

Hapag-Lloyd Unveils THE Alliance (The Maritime Executive)

New Alliance Set to Take on 2M, Ocean Alliance (JOC)

Hapag-Lloyd and Asian Lines Form Six-member Alliance (Lloyd’s List)

HMM’s Joining to THE Alliance ‘Just A Matter of Time’ (World Maritime News)

The Value of Stability within the Alliance Scramble

Source: www.magnates.biz

Earlier this year in April, France’s CMA CGM announced that it would be joining a new carrier alliance next spring. The alliance, known as Ocean Alliance, is newly formed and will include Asian carriers Cosco, Evergreen, and Orient Overseas Container Lines. This decision leaves three currently existing alliances (G6, CKYHE, and Ocean Three) falling short of partners and in need of replacing their members and rerouting their network.

What began as potential merger negotiations between German carrier Hapag-Lloyd and Arab carrier UASC has now appeared to become efforts to form a new alliance, consisting of all the remaining members of G6, CKYHE, and Ocean Three, as well as carrier Hamburg Süd. The landscape of the container market seems to be evolving into a field marked by three major alliances: Ocean Alliance, the unnamed alliance headed by Hapag-Lloyd, and the currently existing alliance 2M.

The 2M alliance between Swiss-based company MSC and industry-leading company Maersk Line was formed last year and is expected to last until 2025. Maersk Line CEO Søren Skou expressed his confidence and relief in not having to partake in this current alliance commotion, stating: “We are pleased that we don’t have a horse in this race right now.” He believes that the alliance scramble will put the 2M alliance at an advantage.

Every time a new alliance is formed, companies must reroute their network of vessels. This additional cost will put increased pressure on the companies as well as their relationships with customers. Skou believes another advantage 2M holds is their alliance size. Despite being the largest alliance by capacity, all decisions will only have to be agreed upon between two carriers. This allows for quicker network reviews that will lead to “improved efficiency and fewer costs”. Whatever the outcome, there is no doubt that this alliance scramble will result in a great shift within the field.

SOURCE: www.shippingwatch.com

Additional Information:

Container Operators China Shipping Group, CMA-CGM Form Ocean Alliance (WSJ)

Maersk Line CEO Sees Advantage in Alliance Commotion (Shipping Watch)

Hapag-Lloyd and United Arab Shipping in Merger Talks (WSJ)

MSC: 2M Stands to Gain from Alliance Shake-ups via Consolidation (JOC)