Privatization of Korea’s top container line HMM to gain traction

South Korea’s move to privatize container shipping line HMM Co. to recover taxpayer money is gaining traction as government officials start looking into the feasibility of a share sale while reaching out to potential buyers.

Oceans and Fisheries Minister Cho Seung-hwan said in a new year business report to President Yoon Suk-yeol on Wednesday that the ministry, jointly with consulting firms, will soon review the feasibility of selling controlling stakes held by state agencies and analyze the list of potential buyers.

During a media briefing, Cho also said the government is working to create conditions for the sale of HMM, although it is not in a rush.

The ministry earlier said it expects to complete the privatization of HMM by the end of 2025.

When talk of the HMM stake sale surfaced following the sale of Daewoo Shipbuilding & Marine Engineering Co. (DSME) in September, Minister Cho said the government will be more prudent in pushing ahead with HMM’s privatization.

In the 2 trillion won ($1.4 billion) deal in September, Hanwha Group acquired a controlling stake in DSME from the state-run Korea Development Bank (KDB).

REACHING OUT TO HYUNDAI, POSCO, CJ, LX

State-run bank KDB, HMM’s largest shareholder and top creditor, has been exploring the sale of its stake in the container ship carrier to recover taxpayer money it injected into the company.

In November, KDB contacted major Korean conglomerates, including Hyundai Motor Group, POSCO Holdings Inc., LX and CJ to see if they were interested.

HMM, formerly known as Hyundai Merchant Marine, was taken over by KDB in 2016 after the company accumulated huge losses amid an industry slowdown.

KDB currently owns 20.69% of HMM as its largest shareholder, followed by state-run Korea Ocean Business Corp. (KOBC), which holds a 19.96% stake.

While struggling to survive, HMM issued over 3 trillion won in convertible bonds (CBs) and bonds with warrants (BWs) in 2017 to raise operating funds, and the state-run bank and KOBC assumed most of them.

If both KDB and KOBC convert their CBs into shares, the two largest shareholders’ combined stake in HMM will reach up to 74%.

SALE COULD BE A TOUGH JOB

Shares of HMM have often been under pressure on concerns that KDB might seek to sell its stake to the market in a gradual way to ease the financial burden of a potential buyer.

Industry watchers said the sale of a controlling stake in HMM may not be easy given the global economic slowdown.

HMM’s corporate value could also be subdued given falling seaborne shipping rates, which have shed more than 80% over the past year.

Meanwhile, Minister Cho, in Wednesday’s business report to President Yoon, said the government will set up a 1.7 trillion won fund to support domestic shipping companies in trouble.

The fund will be used to buy up to 50 vessels from financially weak smaller shippers and lease them to larger shipping firms.

The government will also assist Korean shipping companies in expanding logistics infrastructure at seaport and terminal facilities in the US, Southeast Asia and other regions.

Write to Jung-hwan Hwang at jung@hankyung.com
In-Soo Nam edited this article.