News / 'Learn from Hanjin collapse' – government urged to nationalise HMM

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HMM should be nationalised, according to Busan civic groups and members of South Korea’s marine industry that have begun lobbying the government to stop seeking a buyer.

Lobbyists, including the National Movement For A New Maritime Power, Busan Port Development Association, claim the three companies vying to acquire HMM may not be able to support the shipping group in a crisis and are urging government not to rush into a sale.

The state took control of HMM by swapping debt for equity in 2016, the shares being held by Korea Development Bank (KDB) and Korea Ocean Business Corp (KOBC). They plan to sell a 40.65% stake, which could increase to 57.87% if KRW1trn ($742m) of bonds are converted to stocks.

Harim-JKL, Dongwon Group and LX International, all South Korean businesses, have been shortlisted as HMM’s next major owner, with the preferred bidder expected to be named next month.

But yesterday, the lobbyists said: “Ocean-going container shipping is a business of national interest and is difficult for private companies. It would be wise to turn HMM into a national enterprise, or a joint stock company in which all citizens are investors, without a single large shareholder. Considering the bidders’ asset scales, it’s questionable whether HMM can cope with a future recession. It’s not advisable to sell HMM in a hurry.

“HMM must grow with international competitiveness and lead the development of the [domestic] shipping industry. There’s a great need for solid national support to nurture HMM into a world-class ocean-going liner operator.”

Urging the government to learn from the collapse of Hanjin Shipping in 2017, the lobbyists also claimed the sale of HMM reflected a desire by KDB and KOBC to “monetise HMM bonds held by KDB”.

Harim-JKL, Dongwon and LX are fund-raising by various means, including asset sales, to take over HMM at a price estimated between KRW5 trillion ($3.5bn) and KRW10trn ($7.4bn).

However, Linerlytica analyst Tan Hua Joo told The Loadstar: “It is unlikely that any of the prospective buyers would be able to match the asking price, and I expect the sale to be withdrawn.”

Recent attempts to sell South Korean shipping companies that were deemed strategically important to the country resulted in either the sale being called off, or nationalisation in some form.

In July, South Korean private equity firm IMM aborted plans to sell HMM’s former LNG shipping unit, Hyundai LNG Shipping, whose main customer is state-controlled Korea Gas Corp. This was reportedly after pressure from the government. JP Morgan and Goldman Sachs were reportedly interested in Hyundai LNG, but there were concerns about foreign control of South Korea’s LNG supply chain.

In September, Woori Bank’s private equity arm, Woori PE, with HMM and KOBC formed a consortium to buy dry bulk concern Polaris Shipping, which holds substantial shipping contracts with steelmaker Posco, state-run Korea Electric Power Corp and Brazilian miner Vale. The consortium is reportedly paying $448m for Polaris, after the government was said to be concerned that China’s state-controlled Cosco group wanted to bid for the company.

Meanwhile, a state-owned shipping line is also being considered in Thailand. The transport ministry said last week it  was conducting a feasibility study. Sources told the Bangkok Post it would account for some 2% of the country’s trade and would start operations with four containerships.