Update: KDB to exchange 37% of HMM convertible bonds; state to sell nearly 58% stake

Update KDB to exchange 37 of HMM convertible bonds state.jpg

Korea Development Bank (KDB) has announced that as part of its divestment of HMM’s shares, it will sell all its existing shares, plus 37% of its convertible bonds.

In a notice posted on 20 July on Korea Online E-procurement System, which manages the South Korean government’s procurement processes, including bidding and contract-signing, KDB said that it will sell its 20.69% stake, comprising 101.19 million shares. KDB will also exchange KRW1 trillion (US$782 million) of the KRW2.7 trillion (US$2.1 billion) of its convertible bonds into shares to be sold along with the original 20.69% stake.

Korea Ocean Business Corporation will also sell all its 97.59 million HMM shares, amounting to a 19.96% stake. This means that after the convertible bonds are exchanged for shares, there will be 398.78 million HMM shares to be sold by KDB and KOBC, amounting to a 57.88% stake.

KDB said that it will exchange the first set of convertible bonds on 2 October, when the state policy lender can exercise the call option on the bonds.

If convertible bonds and bonds with warrants held by KDB and KOBC are converted into shares, the number of outstanding shares of HMM will increase to 689.03 million from 489.03 million.

KDB’s ownership will rise to 29.2%, amounting to 211.9 million shares and KOBC’s stake would go up to 28.68%. The market expects the sale price of HMM to be around KRW5 trillion (US$3.9 billion).

South Korean media reports suggested that KDB will exchange its remaining convertible bonds, amounting to a 14% stake, after most of the state’s interest in HMM is sold. The National Pension Service and Korea Credit Guarantee Fund, both government organisations, hold another 12% of HMM’s shares, meaning that the state could remain a substantial shareholder.

Woo Oh-hyun, chairman of Samra Midas group, parent of HMM’s compatriot competitor SM Line, has made known his interest in acquiring HMM, but local media reports claim that the government is more inclined towards a more established conglomerate that could run HMM stably.

Martina Li
Asia Correspondent

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