Hyundai Group companies rally on restructuring plan

December 25, 2013 Leave a comment

December 23, 2013 4:35 am

Hyundai Group companies rally on restructuring plan

By Song Jung-a in Seoul

Shares in Hyundai Group companies surged on Monday after the South Korean conglomerate announced plans to sell its financial units to repay mounting debts, as part of moves to weather a worsening liquidity crunch.Hyundai aims to raise about Won3.3tn ($3.1bn) through the restructuring. The group will exit the financial sector by selling three units – Hyundai Securities, Hyundai Asset Management and Hyundai Savings Bank – from which it hopes to raise up to Won1tn. It also expects to raise Won340bn by selling the Banyan Tree Hotel in Seoul.

Hyundai Group is a conglomerate with businesses ranging from shipping and logistics to finance and machinery, but it does not include Hyundai Motor or Hyundai Heavy Industries, which were spun off following the 1997-98 Asian financial crisis.

Hyundai Merchant Marine, the group’s flagship shipping company, plans to sell part of its port terminals business and restructure its bulk-carrier operations to raise Won1.5tn. It will also sell its stock holdings, ships and properties at home and abroad including a container-box yard in Busan, the southernmost city of South Korea. It will also seek foreign investment by selling additional shares in Hyundai Elevator and pursuing an initial public offering of Hyundai Logistics.

“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 said.

Investors responded to the move by driving up shares in Hyundai Merchant and Hyundai Elevator.

Hyundai Merchant rose by the daily limit of 15 per cent to Won11,600, the biggest jump in more than six months, while Hyundai Elevator, the biggest shareholder of the shipping company, also surged 15 per cent. Hyundai Securities rallied 6.7 per cent, against a 0.7 per cent gain for the benchmark Kospi Composite.

Hyundai Group companies have been under growing financial pressure to support Hyundai Merchant Marine, which has booked heavy losses in recent years as the global shipping industry has slumped. They have also faced increasing calls from creditors including state-run Korea Development Bank to refinance debt.

Hyundai Merchant posted a net loss of Won345.6bn for the first nine months of the year. It has suffered heavy net losses for the past two years with the shipping industry plagued by overcapacity and low freight rates.

With the restructuring Hyundai aims to pay back Won1.3tn of debt and lower the debt ratios of its three key affiliates – Hyundai Merchant, Hyundai Elevator and Hyundai Logistics – from nearly 500 per cent to less than 300 per cent.

Hyundai’s move comes after Korean Air, South Korea’s flagship carrier, and its affiliate Hanjin Shipping last week unveiled plans to raise Won5tn through asset sales as they struggle with mounting debts and deteriorating cash flow.

Creditors have piled pressure on cash-strapped industrial conglomerates to accelerate restructuring, following a string of bankruptcies including STX, Tongyang and Woongjin.

 

Filed under Macro Trends

Unknown's avatarAbout bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a comment