News / Seoul builds its stake in HMM after KOBC converts bonds to shares

Kim Yang-soo    photo: Korea Ocean Business Corp

The South Korean government has consolidated its control over HMM after the Korea Ocean Business Corporation (KOBC) increased its stake in the flagship carrier more than five-fold , after exercising its right to change convertible bonds to shares a week ago.

HMM said it would fully redeem 191 privately placed convertible bonds and KOBC exercised its right on the same day. The number of shares subject to conversion claim is 83,647,000, and the conversion price per share is KRW7,173 ($6.13). The new shares will be listed on 16 November.

KOBC is changing $510m in perpetual convertible bonds issued in 2017, as part of HMM’s financial restructuring that saw the Korea Development Bank (KDB) and other creditors swapping debt for equity. Issuing perpetual convertible bonds to KOBC, at a low interest rate of 3%, enabled HMM to raise funds to continue its operations.

With the latest move, KOBC’s stake will go up from 3.44% to nearly 20%, becoming HMM’s second largest shareholder after KDB, whose stake will be reduced from 24.96% to 20.69% after the liner operator issues 45.39 million additional shares.

This means the government’s holdings in HMM is just over 40%, although KDB chairman Lee Dong-gull said the policy lender would eventually divest its stake in the liner operator.

KOBC, whose new CEO, Kim Yang-soo, took over in August, said: “Despite the uncertainties of the domestic and international shipping market conditions, we plan to responsibly support HMM until it completes business normalisation.”