Cargo Business Newswire

Monday, March 17, 2014

Korean credit ratings firm downgrades Hanjn, Hyundai Merchant Marine

Korea Ratings has downgraded the credit ratings for Hanjin Shipping and Hyundai Merchant Marine due to deteriorating performance.

Korea Ratings announced Friday it lowered the credit ratings of the two shipping companies' corporate bonds from BBB+ to BBB-, and changed their outlooks from stable to negative. BBB- is only one level above BB+, which is the speculation grade just above junk bond level.

Despite the companies' respective recovery strategies, their challenges include big liquidity pressure, lowered earnings from the weakened shipping industry, sluggish global competitiveness, and a dearth of long-term revenue resources.

Unlike Hanjin and Hyundai Merchant Marine, some of the other leading global shipping lines found ways to post profits in 2013 by enhancing their competitiveness and cutting costs, said analyst Kim Bong-kyun of Korea Ratings.

"They increased investment into fleets despite poor profits and liquidity shortages, resulting in financial troubles. At the end of 2013, Hanjin had 3.2 trillion won ($2.9 billion) in short-term loans, which would mature within a year, while Hyundai had 3.1 trillion won ($2.8 billion). Considering their cash flows, it is urgent for them to secure enough liquidity to repay them," Kim said.

Kim added that the two companies' recent plan to sell their core assets, including Hyundai's intention to sell its LNG transportation business, would help to ease their short-term liquidity problems.

For more of the Korea Times story: koreatimes.co.kr