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Hyundai to sell off financial businesses

December 23, 2013

Hyundai Group said it will sell its financial businesses to reduce debt and focus on its shipping, logistics and elevator-machinery businesses. (Yonhap)

By Kim Tae-jong

Hyundai Group said Sunday that it will sell all of its financial affiliates and other assets to raise 3.3 trillion won, or 3.1 billion dollars in a preemptive measure to avoid a liquidity crisis.

The companies to be put up for auction are Hyundai Securities and the brokerage’s two affiliates – Hyundai Savings Bank and Hyundai Asset Management,

The decision comes as part of a self-rescue plan to lower its high debt ratio. “We will have enough money to solve a liquidity shortage by the first half of next year, but to ease concerns in the market, we decided to take a preemptive and voluntary self-rescue measure,” an official from the group said.

The sales will be carried out through the establishment of a special purpose company, but more details will be decided in the discussion with its main creditor, the Korea Development Bank, and financial authorities, he said.

The sale of Hyundai Securities comes as a surprise, because the group took a firm stance not to offer the brokerage arm for sale until last month, expressing its desire to keep the flagship financial unit. But the group seems to have few other options as it faces a worsening cash shortage, largely due to cash-strapped Hyundai Merchant Marine, the major shareholder of Hyundai Securities ― the shipping unit of the group has about a 40 percent share.

Hyundai Merchant Marine reported a total net loss of 345.6 billion won in the first three quarters of 2013, as well as yearly net losses in 2011 and 2012 because of a slump in the global shipping industry.

Along with the sales of the three financial units, the group plans to sell other assets to focus on shipping, logistics, manufacturing and inter-Korean business projects in the future.

The group will restructure unsuccessful business sections at Hyundai Merchant Marine and sell assets such as property at home and abroad, ships and marketable securities to raise another 2 trillion won.

It will also sell the Banyan Tree Club & Spa in Seoul, which it acquired for 163.5 billion won last year.

The group will push forward plans for Hyundai Merchant Marine to receive foreign direct investment, while Hyundai Elevator will try to raise equity capital by issuing additional shares, although the financial authorities recently delayed approval of its application for a capital increase. Hyundai Logistics will raise cash through an initial public offering.

With the self-rescue efforts, the group expects to be able to repay combined debts of 1.3 trillion won of Hyundai Merchant Marine, Hyundai Elevator and Hyundai Logistics and lower their average debt ratio to below 300 percent. In September, their debt ratio stood at 493 percent.

“With the self-rescue plan, we will focus on four main businesses _ shipping through Hyundai Merchant Marine, logistics through Hyundai Logics, industrial machinery through Hyundai Elevator and North Korean projects through Hyundai Asan,” the official said.