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HHI to implement $3bn ‘management improvement’ plan

HHI to implement $3bn ‘management improvement’ plan
Financially-troubled Hyundai Heavy Industries (HHI) has announced a plan to implement a KRW3.5trn ($3.02bn) management improvement plan by 2018, with an aim to rebuild trust in the market, improve its balance sheet and raise its competitiveness.

The plan will see HHI secure KRW1.5trn with the disposal of its shares of Hyundai Motor and KCC, its stakes in Hyundai Avancis, and certain properties and receivables.

The South Korean shipbuilder will also secure KRW900bn with an employee salary cut and work sharing, as well as securing KRW1.1trn with the spin-off and sell-off of a part of its business and reorganisation of affiliated companies.

In addition, HHI is considering a contingency plan to secure an extra KRW3.6trn in case of need.

“Once the plan is in place, HHI expects that its liabilities-to-equity ratio will drop from the current 134% to 80% by 2018. The total debt will also be cut down by about KRW2trn to KRW6.6trn,” HHI said in a statement.

Since September 2014, HHI has practiced pre-emptive and intensive reform measures worth KRW3.9trn. These measures include sale of corporate shares and treasury stocks, issuance of perpetual bonds, re-engineering of HHI’s portfolio to center more on its core businesses, and a restructure of its business organization by spinning off its industrial machinery business.

These efforts have resulted in HHI posting a net profit of KRW325.2bn in the first quarter this year, ending a nine-quarter losing streak.

The severe recession of the shipbuilding industry has impacted not just HHI, but other leading Korean yards as well including Samsung Heavy Industries (SHI) and Daewoo Shipbuilding & Marine Engineering (DSME). Creditors of Korean yards are pushing the yards to implement additional self-rescue measures.

The global shipbuilding and shipping market slump has caused a nation-wide distress among Korean shipyards and shipowners, as companies undergo restructuring and face real threat of bankruptcy.