News / Harim-JKL consortium named the preferred buyer of HMM

A consortium of South Korean poultry processor Harim Group and private equity firm JKL Partners was today chosen as the preferred bidder for the country’s flagship container carrier, HMM.

The consortium pipped its only competitor, fishing and logistics chaebol Dongwon Group, to the post – they were the only ones who had submitted bids by 23 November.

Formerly known as Hyundai Merchant Marine and originally part of Hyundai Group, HMM was battered by the 2008 global financial crisis and then the prolonged slump in container shipping post-2011. By 2015, HMM had notched-up cumulative net losses of a little under $3bn.

In 2014, HMM sought to improve its balance sheet by selling various assets, such as its dedicated liquefied natural gas (LNG) shipping business to private equity firm IMM, and shares in related companies, but it was not enough. As a result, its debt-to-equity ratio at the end of 2015 was 2,500%, more than 10 times that of 2010’s 243%.

In April 2016, HMM defaulted on the principal and interest of around $800m of corporate bonds that had matured. In order to secure a debt-for-equity swap from its creditor banks, the carrier launched an aggressive self-rescue plan involving the adjustment of rates for period-chartered tonnage.

Next, HMM began to normalise its management, but was separated from Hyundai Group, resulting in its being renamed as its acronym in 2020.

HMM gradually reduced the deficit, but profitability remained elusive. Between 2018 and 2020, the carrier issued more than $2.5bn of perpetual convertible bonds and bond warrants for Korea Development Bank and Korea Ocean Business Corp, both state-backed institutions, to raise additional funds.

However, the Covid-19 pandemic, and the ensuing logistical bottlenecks, brought HMM and its peers record profits between 2020 and 2022. KDB and KOBC decided its management had been normalised and, last year, began looking for a new owner to recover the public funds.

Despite market misgivings and protests from HMM employees and the Federation of Korean Seafarers’ Union, KDB and KOBC pushed ahead with the sale.

Harim and Dongwon both bid about $4.9bn, but it is believed Harim had the edge, thanks to its larger cash holdings, said to be more than $1bn – twice as much as Dongwon.

Led by CEO Kim Hong-kuk, Harim – which had acquired South Korea’s largest dry bulk shipping business, Pan Ocean – wants to take the opportunity to expand  Pan’s container shipping presence, currently limited to intra-Asia routes, and combine HMM’s smaller bulk carrier fleet with that of Pan Ocean.