[Yonhap News Photo]
South Korea's economic chief urged creditors and companies Thursday to endure "pain-sharing" in the restructuring of ailing firms as Hyundai Merchant Marine was locked in tough negotiations with the owners of chartered ships.
Finance Minister Yoo Il-ho said the restructuring of troubled shipbuilders and shipping firms has been fueling concerns about financial market volatility and massive layoffs.
"We will manage and push ahead with corporate restructuring, sticking to our principle that all the persons concerned should endure pain sharing," he told a meeting of economic officials.
His comment came as Hyundai Merchant is under pressure to complete negotiations on lowering rates on leased vessels. Financial officials have mentioned an inevitable choice of putting the company under court receivership if negotiations with ship owners fall apart.
Talks with five foreign ship owners began in Seoul Wednesday but there has been no agreement yet. Hyundai Merchant aims to cut leased fees by 28.4 percent on average that would help the company save about 720 billion won for three years and six months.
Hyundai Merchant reportedly proposed that half of the lowered charter rates could be compensated through a swap with stocks while creditors offered to swap their loans worth 700 billion won into stocks.
Hyundai Merchant and Hanjin Shipping, South Korea's largest container carrier, posted massive losses in the first quarter, hard hit by falling freight rates.
In the January-March period, Hanjin Shipping reported a net loss of 261 billion won, compared with a profit of 22.9 billion won. Hyundai Merchant's first-quarter net loss rose to 276 billion from 44.5 billion won from a year earlier. A hefty payment of chartered fees has undermined their bottom line.
Hyundai Merchant has been left out of a new global shipping alliance formed by six Asian and European container-shipping operators last week to challenge the dominance of global giants such as Maersk Line and Mediterranean Shipping Co.
Initially, Hyundai Merchant was a candidate to be included in the alliance, but it dropped out apparently due to uncertainty caused by delayed negotiations with ship owners.
Hanjin Shipping was included in the alliance, although it was also put under a creditor-led restructuring plan this month. Creditors rolled over its maturing debt for three months.
A prolonged slump in global trade and overcapacity have depressed transportation rates, causing shipping lines to stem losses through job cuts and consolidation. Being part of a vessel-sharing alliance has become imperative for container carriers in the industry. Alliance partners can reduce costs by sharing ships, networks and port calls.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
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