South Korean shipping group Pan Ocean is reportedly selling ships to raise funds to help its parent Harim Group bid for flagship box carrier HMM. So far, Pan Ocean has sold 10 ships this year, consisting of six chemical/products tankers, four bulk carriers, raising around US$132 million.
Sources from South Korea’s investment banking sector told Container News that Pan Ocean is pursuing the sale of three to four more ships, including two ships classified as scheduled for sale in the first half of the year. Earlier in September, Pan Ocean sold Grand Ace 8, a 2008-built 46,197 dwt products tanker, to India’s Great Eastern Shipping, for US$23.8 million.
Reportedly, bulk carriers and tankers that are not committed to long-term cargo contracts, including vessels owned by Pan Ocean’s overseas units, such as the Singapore-incorporated Pan Ocean Trading & Logistics, are subject to sale.
Harim, a poultry processing business, is again teaming with compatriot private equity player JKL Partners, which had helped fund its takeover of Pan Ocean in 2015, for the HMM bid.
The sale price of HMM is expected to be around KRW5 trillion (US$3.5 billion), including the premium for management rights. Harim is expected to raise at least KRW2 trillion (US$1.4 billion), under the premise that it will cover half of the acquisition funds.
Harim-JKL has been shortlisted for the bid, along with South Korea’s largest fishing group Dongwon and logistics company LX International. HMM came under state control in 2016, after its creditors, led by policy lender Korea Development Bank (KDB), exchanged debt for equity. KDB and Korea Ocean Business Corporation plan to sell a 57.87% stake in HMM.
Much has been emphasized on the possibility of raising funds through Pan Ocean’s cash holdings, profits to be earned by the end of the year, and asset securitisation through ship sales.
As of the end of June, Pan Ocean’s cash equivalents, including short-term financial products, were KRW738.1 billion (US$560.87 million). From operating activities, Pan Ocean generated KRW434.5 billion (US$330.17 million). Considering the correction in dry bulk shipping, rates, with cash flow from operating activities estimated at KRW300 billion (US$220 million) in 2H 2023, there will be no problems raising KRW1 trillion (US$739.22 million) within the year.
The remaining KRW1 trillion (US$739.22 million) is expected to be generated from the sale of Pan Ocean’s ships.
Martina Li
Asia Correspondent
