Hyundai Merchant Marine (HMM) will sell the LNG transport business for 1.1 trillion KRW ($1.03 billion) to solve the market’s concern on HMM’s financial status.
HMM said that it sells the LNG business unit as part of its 3.3 trillion valued self-help plan presented last Decembe. HMM has also said that it expects to gain momentum on the implementation of its self-help plan, according to which the disposition was supposed to take place much later in June 2014.
HMM recently started bidding for the sale of its LNG business unit and received LOIs (Letter of Intents) from 6 candidates on February 6th. HMM chose IMM Investment, Corp., as the preferred bidder. The sale value as a whole is estimated at about 1.1 trillion KRW; after an actual inspection on the preferred bidder, HMM will close the deal in the first half of this year.
HMM owns 10 LNG vessels and is in a long-term charter contract with state-run Korea Gas Corporation until 2028. HMM has been transporting 7.3 million ton of gas, which is nearly 20% of South Korea’s annual LNG consumption.
HMM plans to repay relevant debt with the proceeds from this disposition and to secure additional liquidity. HMM says it is expected to gain large profits because LNG business is undervalued on its books.
The proceeds from this asset disposition, in addition to the 600 billion won in cash that HMM secured at the end of last year, will help solve most of the market’s concern on HMM’s financial status.
Moreover, HMM has secured 56.3 billion KRW through the disposition of 18,097 container boxes in December 2013 and 46.5 billion KRW by selling 11.3 million shares in the KB Financial Group. HMM has also announced that it will procure 93 billion KRW by selling shares in the Shinhan Financial Group within 6 months. When HMM secures 70 billion won by selling its land property in Yongdang (in Busan, 453 kilometers south of Seoul), HMM’s self-help plan valued at 1.4 trillion won will become fully implemented.
HMM will make additional capital procurement by implementing more self-help plans.
One HMM official has commented, “It’s too bad that we had to sell the LNG Business Unit, which provided us with sizable profits and stable cash flow. But we’ll focus our ability on enhancing the global competitiveness of our containers and bulk units, and by doing so we’ll be able to become the best shipping company.”
[mappress]
HMM, February 28, 2014