The South Korean government is now inclined to find a buyer for its substantial shareholding in flagship liner operator HMM, after earlier asserting that the company should remain under state control.
In a report handed to President Yoon Suk-yeol over the weekend, Minister of Oceans and Fisheries Cho Seung-hwan has proposed that the government’s shares, held by Korean Development Bank (KDB), Korea Ocean Business Corporation (KOBC), Korea Credit Guarantee Fund (KODIT) and National Pension Service, be sold in phases.
The government bodies hold a combined 52%, but convertible bonds that mature in 2023 could take their interest to 74%, and the high price would deter any buyers from emerging.
Cho explained, “Even acquiring a 35% stake, which would give one the management rights over HMM, close to KRW10 trillion (US$7.6 billion) will need to be invested.”
In May, Cho had expressed his view that ongoing logistical bottlenecks had distorted the actual supply-demand situation and he could not be certain that it was time for the government to release its control over HMM. This was despite calls by KDB chairman Lee Dong-gull and Cho’s predecessor Moon Seong-hyeok that with HMM achieving record profits in the last two years, it was time for the company to be liberated from state control.
KOBC, a state-backed ship finance institution which is now managing HMM, will plan the sale of its management rights, and this is to take place over the medium to long term.
The state took control over HMM, formerly Hyundai Merchant Marine, in 2016, after years of losses pushed the company to the brink. After the company renegotiated its long-term charter agreements, its main creditor, KDB, swapped its debts for equity.
The Covid-19-related logistical crunch brought historical earnings to the liner industry in 2020 and 2021, and the good performance is expected to continue into 2022, despite softening spot freight rates.
In the first half of the year, HMM’s net profit rocketed to US$4.6 billion, surpassing the net profit for the whole of 2021 by US$200 million.
Steel-making group POSCO, Hyundai Motor, the CJ Group and the SM Group have been touted by South Korean media as potential buyers for the government’s HMM shares, although the parties have previously said they are not keen to buy HMM.