South Korean ocean liner Hyundai Merchant Marine Co. (HMM) plans to buy a 20% share in troubled compatriot carrier Hanjin Shipping’s subsidiary Total Terminals International LLC (TTI), which operates a terminal at the Port of Long Beach in the U.S.
In a regulatory filing, HMM said its board of directors decided to acquire a 20% stake in Hanjin Shipping’s TTI and in equipment-leasing firm HTEC for a combined cost of US$15.6 million.
With this decision, HMM said it will be able to save on costs and secure a stable profit on the Asia-U.S. trade lane.
A U.S. court recently gave its approval to Hanjin Shipping to sell its stake in TTI, which operates container terminals at ports in Seattle and Long Beach, California.
If the deal pushes through, HMM will become the second largest stakeholder in TTI after Swiss box liner MSC, with the Korean carrier gaining from it with less responsibility.
HMM’s principal perks include expanding its basic slot allocation for the U.S. West Coast, buying the stake at low investment costs, receiving the same port tariff rates as MSC, and improving its sales competitiveness in the Asia-U.S. market.
Also, MSC will stand surety for TTI’s loans worth $320 million and its lease worth $900 million to be paid to the U.S. Port Authority for the next 11 years. As HMM is not responsible for TTI’s debts and surety, its financial burden will be reduced.
An official from HMM said the firm expects handling volumes at the Long Beach Terminal to dramatically increase as it beefs up its Asia-U.S. operations through a strategic cooperation with the 2M alliance beginning April.
The TTI’s board will be composed of two directors from MSC and one from HMM. MSC needs the consent of HMM when making important management decisions, such as a change of business purpose and capital expenditure.
Hanjin, previously one of the world’s biggest container carriers, filed for court receivership in early September of last year as it wallowed in multi-billion-dollar debt.
In December, it signed a contract with MSC to sell its 54% stake in Long Beach Terminal, the second busiest container port on the U.S. West Coast and operated by TTI.
At the same time, SM Group, a mid-sized South Korean conglomerate that owns the country’s second biggest bulk carrier, agreed to acquire Hanjin’s U.S.-Asia route and other assets for KRW37 billion.
Photo: Regular Daddy
