Hyundai Group folds financial business; to Raise at Least 3.3 Trillion Won Selling Assets

Hyundai Group to Raise at Least 3.3 Trillion Won Selling Assets

Hyundai Group, owner of South Korea’s second-largest shipping company, plans to sell assets including financial units and a hotel for at least 3.3 trillion won ($3.1 billion) to boost cash.The group will sell Hyundai Securities Co. (003450) and two other financial businesses to raise as much as 1 trillion won, it said in an e-mailed statement yesterday. Hyundai Merchant Marine Co. (011200), the biggest shareholder of Hyundai Securities, plans to sell stakes in its terminal business and restructure bulk-carrier operations for about 1.5 trillion won. The group also expects to reap 340 billion won by selling the Banyan Tree Hotel in Seoul, it said in the statement.

Hyundai Group’s plan comes after Korean Air Lines Co. said last week it plans to raise 3.5 trillion won by selling assets, including refiner S-Oil Corp. shares and airplanes. Some South Korean freight companies are running low on cash as weak demand and excessive capacity have caused rates to slump.

“While the company has sufficient funds to last until the first half of next year, we’ve decided to come up with a restructuring plan to calm investors’ concerns,” Hyundai Group said in the statement. “We plan to continue restructuring the group next year.”

The group plans to seek foreign investment for Hyundai Merchant, and to sell additional Hyundai Elevator Co. (017800) shares and carry out an initial public offering of Hyundai Logistics Co.

Hyundai Group will focus on its shipping, logistics and machinery businesses along with North Korea tourism operations for further growth, according to the statement. Hyundai Merchant plans to sell a container-box yard in South Korea as well as real estate it owns in the U.S., China and Singapore.

South Korean freight carriers are seeking to pare debt as an expansion after the 2008 global financial crisis pushed them into losses. Hyundai Merchant has 1 trillion won of bonds to pay in the next two years, compared with 678 billion won in cash at the end of September, according to data compiled by Bloomberg.

To contact the reporters on this story: Sharon Cho in Seoul at ccho28@bloomberg.net; Kyunghee Park in Singapore at kpark3@bloomberg.net

2013-12-22 16:43

Hyundai folds financial business

Conglomerate to secure over W3 tril. by selling key assets
By Kim Tae-jong
Hyundai Group said Sunday that it will sell all of its financial affiliates and other cashable assets to raise over 3 trillion won in a preemptive measure to avoid a liquidity crisis.
The companies to be put up for auction are Hyundai Securities and the brokerage’s two affiliates, Hyundai Savings Bank and Hyundai Asset Management, which are worth an estimated 1 trillion won.
The decision comes as part of a self-rescue plan to lower its high debt ratio.
“We will have enough money to solve a liquidity shortage by the first half of next year, but to ease concerns in the market, we decided to take a preemptive and voluntary self-rescue measure,” an official from the group said.
The sales will be carried out through the establishment of a special purpose company, but more details will be decided in the discussion with its main creditor, the Korea Development Bank, and financial authorities, he said.
The sale of Hyundai Securities comes as a surprise, because the group took a firm stance not to offer the brokerage arm for sale until last month, expressing its desire to keep the flagship financial unit.
But the group seems to have few other options as it faces a worsening cash shortage, largely due to cash-strapped Hyundai Merchant Marine, the major shareholder of Hyundai Securities ― the shipping unit of the group has about a 40 percent share.
Along with the sales of the three financial units, the group plans to sell other assets to focus on shipping, logistics, manufacturing and inter-Korean business projects in the future.
The group will restructure unsuccessful business sections at Hyundai Merchant Marine and sell assets such as property at home and abroad, ships and marketable securities to raise another 2 trillion won.
It will also sell the Banyan Tree Club & Spa in Seoul, which it acquired for 163.5 billion won last year.
The group will push forward plans for Hyundai Merchant Marine to receive foreign direct investment, while Hyundai Elevator will try to raise equity capital by issuing additional shares, although the financial authorities recently delayed approval of its application for a capital increase. Hyundai Logistics will raise cash through an initial public offering.
With the self-rescue efforts, the group expects to be able to repay combined debts of 1.3 trillion won of Hyundai Merchant Marine, Hyundai Elevator and Hyundai Logistics and lower their average debt ratio to below 300 percent. In September, their debt ratio stood at 493 percent.
“With the self-rescue plan, we will focus on four main businesses _ shipping through Hyundai Merchant Marine, logistics through Hyundai Logics, industrial machinery through Hyundai Elevator and North Korean projects through Hyundai Asan,” the official said.

Hyundai Group to sell finance arms to raise cash

Group eyes sustained growth

Dec 23,2013

Hyundai Group, the nation’s 20th-largest conglomerate, announced a plan to raise more than 3.3 trillion won ($3.1 billion) by selling its financial companies and other assets to improve its fiscal health and solve a liquidity crisis caused by slumping core affiliate Hyundai Merchant Marine (HMM).
“We have enough cash until the first half of 2014, but to wipe out people’s concern we have prepared a pre-emptive, voluntary, highly intensive structuring plan,” the group said in a release. “Hyundai Group has considered over and over whether to sell financial affiliates, but to solve the liquidity crisis and regain the trust of the market, we have made a final decision.”
Hyundai Group first said it will sell Hyundai Securities, Hyundai Asset Management and Hyundai Savings Bank and expects to raise 700 billion won to 1 trillion won.
In addition, Hyundai Group said it will sell some stakes of HMM’s port terminal business and restructure its bulk carrier business to bring in 1.5 trillion won.
HMM, the nation’s second-largest shipper, also will sell some of its ships and properties at home and abroad to raise 480 billion won. The properties to be sold include the Yongdong Dockyard in Busan and real estate in the United States, China and Singapore.
The conglomerate also will conduct internal business restructuring of affiliates, including HMM and Hyundai Asan, which manages business with North Korea. In addition to increasing the profitability and efficiency of affiliates, Hyundai Group also will sell the Banyan Tree Club and Spa in central Seoul to raise 340 billion won.
Besides restricting and selling assets, the group also will push its efforts to attract third-party investment. Hyundai Group said it plans to increase capital by issuing new stock for Hyundai Elevator, an initial public offering for Hyundai Logistics and foreign investment in HMM. The group expects this to yield at least 320 billion won.
According to Hyundai Group, sales of financial companies will be processed after setting up a special purpose company (SPC). After transferring assets of its financial affiliates to the SPC, details of the sales will be confirmed following negotiations with its main creditor, Korea Development Bank, and other creditors, Hyundai Group said.
If all of its financial restructuring goes according to plan, Hyundai Group said it will be able to pay 1.3 trillion won worth of debt, which would drop the combined debt ratio of HMM, Hyundai Elevator and Hyundai Logistics from 493 percent to about 200 percent, and raise 2 trillion won in liquidity.
Industry insiders said although the group has more than 500 billion won on hand and successfully returned debts from corporate bonds this month, its financial situation is worsening.
HMM’s loans in the first half totaled more than 6.6 trillion won as its debt-to-equity ratio surged to 895 percent, while its credit ratings have plunged from A- to BBB+. The company hasn’t been in the black for the past two years.
Following HMM’s slump, the financial health of Hyundai Elevator, the largest shareholder of HMM and considered to be a de facto holding company for Hyundai Group, also worsened.
Hyundai Elevator in 2006 signed a derivative product deal with several securities firms to protect the group’s ownership. These security companies bought HMM’s stock, and if the stock price falls below the original price, Hyundai Elevator promised to make up the difference.
Hyundai Elevator’s estimated loss from the derivative deal is 450 billion won. The nation’s top elevator manufacturer’s operating profit was about 70 billion won through the third quarter.
In addition to a worsening business situation, the group also needs to pay 420 billion won in corporate bonds and 400 billion won in commercial paper that expire in the middle of next year.
HMM has been trying to enhance profitability. The company said through the G6 Alliance, which is a coalition of global shippers, it has adjusted cargo volume and service, while reducing charter cost. It also adopted slow steaming to cut fuel costs. HMM also said it signed a deal with a global consulting firm in October to adjust its business structure and cut costs.
Hyundai said that after selling its financial business, the group’s business portfolio will be focused on four sectors: shipping (HMM), logistics (Hyundai Logistics), machinery, (Hyundai Elevator) and inter-Korea business (Hyundai Asan).
“It is painful to sell the finance unit, which was a core part of the group’s business portfolio, but with the plan, we can solve liquidity problems and focus on a core business that raises possibility of sustainable growth,” Hyundai Group said. “Hyundai will be a more solid company starting from this restructuring.”
BY JOO KYUNG-DON [kjoo@joongang.co.kr]