South Korean government plans to sell HMM stake in stages

According to media reports, the South Korean government is now leaning towards finding a buyer for its large stake in flagship liner operator HMM, which it has previously claimed should remain under state control.

In a report to President Yoon Seok-yeol over the weekend, Cho Seung-hwan, Minister of Oceans and Fisheries, proposed that the Government Share Fund (KODIT), which is owned by the Korea Development Bank (KDB), the Korea Ocean Business Corporation (KOBC), the Korea Credit Guarantee Corporation, and the National Annuity services, sold in stages. Government agencies hold a combined 52% stake, but interest in convertible bonds due in 2023 could reach 74%, and the high price will prevent any buyers from emerging. "Even acquiring a 35 percent stake, which would give HMM management rights, would require an investment of nearly 10 trillion won ($7.6 billion)," Cho explained.

In May, Cho said that persistent logistical bottlenecks had distorted actual supply and demand, and he could not be sure it was time for the government to lift its grip on HMM. Despite calls from KDB chairman Lee Dong-Ou and Zhao's predecessor Moon Sung-hyuk, with HMM posting record profits over the past two years, it's time for the company to break free from state control.

The state-backed ship finance institution KOBC, which currently manages HMM, will plan to sell its management rights, which will take place in the medium to long term. The state took over HMM, formerly known as Hyundai Merchant Marine, in 2016, and the company was on the brink of collapse after years of losses. Its main creditor, KDB, swapped its debt for equity after the company renegotiated its long-term charter agreement.

The Covid-19-related logistics crunch has delivered historic gains for the liner industry in 2020 and 2021, and despite softer spot rates, the good performance is expected to continue into 2022.In the first half, HMM's net profit soared to $4.6 billion, $200 million higher than its full-year 2021 net profit. Steel manufacturing group POSCO, Hyundai Motor, CJ Group and SM Group have been touted by South Korean media as potential buyers of the government's HMM shares, although parties have previously said they are not keen on buying HMM.

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