Xingya Sea, The Fifth Largest Shipping Company In South Korea, Seeks Debt Restructuring

- Mar 13, 2020-

A novel coronavirus epidemic and Global trade slowdown continue to hit the shipping industry, according to the Wall Street journal. Heung-A Shipping, the fifth largest shipping company in South Korea, is seeking debt restructuring.


The board of directors of Xingya shipping has approved the debt restructuring plan of KDB, its main creditor, to "improve its financial situation and normalize its business operation". Under the financial rescue plan led by the Industrial Bank of Korea, creditors will take measures to help the troubled Xingya shipping company avoid bankruptcy.


"The priority is to work out a restructuring plan so that its ships will not be seized by creditors and will continue to operate," said a senior executive at Industrial Bank of Korea The executive said Xingya shipping has been losing money in recent years, and the current epidemic has exacerbated its predicament.


Since 2016, Xingya shipping has been in a state of loss. In the first three quarters of 2019, Xingya shipping lost 38.2 billion won (about 32 million US dollars), and the loss increased nearly 50% year on year. By the end of September last year, the company's debt to equity ratio had soared to an astonishing 6378.2%, five times that of the past three quarters.


Since last year, Xingya shipping has taken measures to relieve the financial pressure. In June, the company cancelled 93.3 million shares, thus reducing the capital of 46.6 billion won. In December, the company also transferred 90% of its centralized transportation business shares to South Korea's Changjin merchant shipping at a price of 36 billion won, with only the tanker business retained.


Fairmont partners, the largest shareholder of Xingya shipping, controls nearly 30% of Xingya shipping. In November, Fairmont partners agreed to transfer its stake to caris kukbo, but failed to close the deal by the December deadline.


Xingya shipping was founded in 1961 and listed in 1976. From 1985 to the mid-2000s, the company was taken over by the court, when Fairmont partners became the majority shareholder, preventing Xingya shipping from being acquired by overseas companies.


Last December, Xingya shipping and Changjin merchant ship completed the integration of container business, which is the first case of independent integration between Korean shipping companies. However, in the process of promotion, there are some difficulties such as the deterioration of the operating conditions of the shipping company and the opposition of the interests of the creditor group due to the lack of liquidity.


To this end, the South Korean government said that in the process of promoting integration, it would be better to have a detailed understanding of the business operation and reach a consensus with the creditor group than the participating shipping companies. In addition, it is not only the merger of shipping companies, but also the cooperation of shipping companies on specific routes. South Korea sea water department will also actively support the independent participation of shipping companies in business integration.