Financial Services Commission Chairman Yim Jong- yong speaks about restructuring. [Aju News DB]
South Korea's financial watchdog ruled out the forced reshuffle of troubled shipbuilders and shipping firms on Tuesday, saying corporate restructuring should be led by creditors to reduce their debt and cost.
Financial Services Commission Chairman Yim Jong-yong said that it's too early to talk about a possible merger in the fields of shipbuilding or shipping.
"There is a firm principle that the restructuring of each company must be led by creditors," he told reporters, urging creditor banks to focus on the restructuring of debt-stricken firms.
He said the restructuring of South Korea's two largest shipping entities -- Hanjin Shipping and Hyundai Merchant Marine -- depends on how to bring down fees paid the owners of charters ships.
"There will be no progress in restructuring if negotiations on chartered fees fail," he said, adding the total amount of chartered fees Hanjin Shipping and Hyundai Merchant should pay under a long-term contract exceeds five trillion won (4.34 billion US dollars).
He set the deadline for Hyundai Merchant to complete negotiations on chartered ships, warning the company could be put under a court receivership if it fails to lower the fees by mid-May.
Yim urged company chiefs, major shareholders and ship owners to share the financial burden with creditors. "We cannot wait for a long time."
The two shipping companies were under pressure to ride out a credit crunch by speeding up the sale of non-core assets after they applied for creditor-led restructuring.
Hanjin Shipping said in a stock market notice Tuesday that it would try to acquire an additional fund of 411 billion won by selling assets.
Hanjin Shipping, one of the world's top ten container carriers in terms of capacity, is saddled with a debt of 5.6 trillion won, and falling freight rates have been blamed for aggravating its financial crisis.
Hanjin Shipping is a subsidiary of the Hanjin Group controlled by Cho Yang-ho, who is also the chairman of South Korea's top carrier Korean Air.
Hyundai Heavy Industries, the world's largest shipbuilder, reported a turnaround in its first quarter earnings, helped by reduced costs and gains in non-shipbuilding businesses. It swung to a net profit of 244.5 billion won ($212 million) in the January-March period, from a net loss of 378 billion won a year ago.
Hyundai Heavy attributed the turnaround to cost-cutting efforts, a smaller deficit in offshore plants, and an improvement in its non-shipbuilding segment. But the company benefitted much from a profit in its petroleum and refinery affiliate, Hyundai Oilbank.
The shipyard, however, admitted the profit was not enough to ease its financial crisis as it has secured an order of just five ships so far this year and no order in offshore plants since November 2014.
"An empty dock is becoming real," Hyundai Heavy executives said in a joint appeal urging workers to share the pain. "To keep our shipyard rolling, we have to compete with Chinese shipyards. You may lose your job if we fail to beat them in terms of price, quality, and delivery."
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
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