Hanjin Shipping Co., South Korea’s largest sea-cargo carrier, said it will sell a majority stake in its bulk-shipping company as part of a plan to raise cash and cut debt.
Hahn & Co., a South Korean private equity fund, will pay 300 billion won ($283 million) for a 76 percent stake Hanjin Shipping’s bulk-carrier business, the cargo carrier said in an e-mailed statement today. The Seoul-based liner will hold the rest.
Hanjin Shipping said last week it plans to raise 1.97 trillion won selling some of its assets like vessels and stakes in container terminals to repay debt. South Korea’s three biggest shipping companies all face a cash crunch as 3 trillion won of bonds are due for repayment in the next two years amid mounting losses from a global slump in rates to carry cargo.
Hahn & Co., which will also invest 100 billion won into the venture, will control a company that has 36 vessels that Hanjin Shipping currently operates under long-term contracts.
Hanjin Shipping’s debt-to-equity ratio will fall to 673 percent from 987 percent at the end of September, once the venture starts operations as early as in April, according to the statement. The 1.4 trillion-won debt associated with the 36 vessels will be transferred to the venture, it said.
Korean Air Lines Co., an affiliate of the shipping company, said last week it will provide 100 billion won in loans, on top of the 150 billion won it gave to Hanjin Shipping in October. Korean Air will also buy 400 billion won of new shares the shipping company plans to sell next year.
Hanjin Shipping has about 1.56 trillion won of debt, including bonds and loans, coming due next year and 1.08 trillion won in 2015, according to the company. At the end of September, it had cash and near-cash items of 382 billion won.
Hahn & Co. currently manages about 850 billion won in assets in cement, auto parts and electronics components. The fund dropped a bid in February to buy Korea Line Corp., the country’s second-biggest operator of bulk ships that was then under court receivership.