Learn from Han Jin's bankruptcy! Civil society groups urge the South Korean government to nationalize HMM

South Korean civil society groups have recently begun lobbying the South Korean government to end the search for a buyer, urging the government to nationalize Han Shin Shipping (HMM).

After Hapag-Lloyd was ruled out, the three finalists for HMM were all Korean companies, including Korean logistics and trading group LX International, Dongwon Foods Group, and Pan Ocean's parent company, Harim Group, in a consortium with JKL Partners, according to the report. Lobbying groups including the New Ocean Power of Korea and the Busan Port Development Association claimed that the three companies bidding for HMM were only "medium-sized" and lacked the capital strength needed to buy HMM, and urged the South Korean government not to rush the sale.

In 2016, the South Korean government took control of HMM through a debt-for-equity swap, with the Industrial Bank of Korea (KDB) and the Korea Ocean Business Corporation (KOBC) holding a combined 40.65% stake. In addition, if the 1 trillion won convertible bonds are converted into shares, it will raise the state-owned holding to 57.87 percent.

Earlier, KDB Chairman Kang Seo-hoon told a hearing at the National Assembly of Korea, "We won't sell HMM if there is no qualified buyer. of course, there is no reason to sell."

According to these lobby groups, "Ocean container transportation is a business of national interest, which is difficult for private companies. It would be wise to transform HMM into a state-owned enterprise, or a joint stock company in which all citizens are investors, without a single major shareholder. Considering the size of the bidder's assets, it is doubtful that HMM will be able to cope with future economic downturns. Selling HMM is not advisable and we are in a hurry."

"HMM must grow with international competitiveness and lead the Korean shipping industry. Solid state support is very much needed to develop HMM into a world-class ocean liner operator."

Urging the government to learn from the collapse of Hanjin Shipping in 2017, the lobby groups also claimed that the sale of HMM reflects KDB and KOBC's desire to "monetize KDB's holdings of HMM bonds."

The three South Korean companies shortlisted to bid for HMM are raising funds in various ways, including selling assets. Market participants expect KDB's and KOBC's holdings in HMM to be valued at between $3.5 billion and $7.4 billion.

However, Linerlytica analyst Tan Hua Joo said, "It is unlikely that any of the potential buyers will be able to raise enough money and I expect the sale to be canceled."

Recent attempts to sell Korean shipping companies considered strategically important to South Korea have resulted in either cancelled sales or some form of nationalization.

In July, IMM, a South Korean private investment fund, abandoned plans to sell Hyundai LNG Shipping, whose main customer is the state-controlled Korea Gas Corporation.

In September, Woori PE, a subsidiary of Woori Financial Group, formed a consortium with HMM and KOBC to acquire Polaris Shipping, a large ore carrier (VLOC) giant with extensive shipping contracts with steelmaker POSCO, Korea Electric Power Corp. and Brazil's Vale.