Chairman Moon Chang-yong of Korea Asset Management Corp(KAMCO), 4th R, and heads of the shipping firms hold an agreement on KAMCO purchasing 20 of their vessels they signed on May 15 to ease their financial pinches.

Korea Asset Management Corp. (KAMCO) will buy 20 ships from firms in financial distress at a cost of 330 billion won, including those put up for sale by Hanjin Shipping, and lease them back to the original owners to help relieve their liquidity problems.

According to shipping industry sources on May 8, KAMCO plans to sign agreements on May 15 with six shipping firms, including SM Merchant Marine, Korea Commercial Shipping and Pan Ocean to buy 13 container ships and 7 bulk carriers. 

The state-owned debt restructuring company will sign the Korea Tonnage 19-38 Shipping Fund with those shipping firms to buy the 20 ships, including six of Hanjin Shipping’s 8600 TEU and 6700 TEU class container vessels, and four bulk carriers, including one 180,000 DWT class ship and 10 90,000 DWT class vessels. KAMCO will spend 230 billion won of its own money to complete the purchases, while the rest will be financed with bank loans.

Acquiring vessels from financially troubled shipping companies will remain one of the mainstay jobs handled by Korea Asset Management Corp. (KAMCO) next year.

As of the end of last October, the state-run debt restructuring company will have purchased 35 vessels, including Hanjin Shipping and Hyundai Merchant Marine, for 505.5 billion won ($434 million) since the 2008 financial crisis, according to KAMCO. "This year, we are planning to acquire five bulk carriers from small-and mid-sized shipping firms for 71.1 billion won. Next year, we will spend at least 100 billion won to buy vessels and lease them back to shipping companies when their financial situations are improved," KAMCO told reporters.

The shipping industry is still at rock bottom due to oversupply and low shipping rates resulting from low demand. It is widely expected to take several years for shipping and shipbuilding firms to make a meaningful turnaround. Hanjin Shipping swung to a net profit of 188.4 billion won in the January-September period from a net loss of 384 billion won in the same period of a year earlier. The country's biggest container company by sales posted heavy net losses for four straight years through 2014, according to a regulatory filing.

"For now, we don't have a plan to sell our vessels and lease them back from KAMCO," a Hanjin Shipping official said, adding that the company focuses on completing its self-rescue program by shedding non-core assets. Hyundai Merchant Marine, the second-biggest container carrier, shifted to a net loss of 218.8 billion won from a net profit of 149.8 billion won during the same period, showed a separate filing.

"Global cargo charges do not show signs of recovery at all as multinational shipping companies sell more container carriers in the market amid an extended downturn. Even Denmark's AP Moller Maersk stopped placing new orders for ships due to falling rates and oversupply," said a Hyundai Merchant spokesman.

In March this year, KAMCO leased back 33 of the 35 ships it purchased in the past six years to their former owner-shipping companies as their acute financial problems were resolved. The government earned 150.2 billion won in investment gains from the deals, KAMCO said.

A view of KAMCO building in Seoul.(Photos: KAMCO)