Bondholders of Hyundai Merchant Marine Co. will gather to decide whether to approve a debt recast offer by the financially shaky shipper amid growing pressure from its creditors to join a move to salvage the country's No. 2 shipping line, industry sources said Tuesday.

During a two-day meeting that runs through Wednesday, Hyundai Merchant will propose a plan to bondholders that more than half of their debt, totaling some 800 billion won ($672 million), will be swapped for the shipper's stocks and the remaining debt be paid back after two years.


Last week, its creditors, led by state-run Korea Development Bank, agreed to swap 680 billion won worth of debt for the shipper's stocks, as part of an effort to keep the shipper afloat.

Hyundai Merchant had debts of about 5.2 trillion won as of the end of March.

The debt recast is one of the key prerequisites for the shipper to be put under a creditor-led rehabilitation scheme.

Hyundai Merchant is in final talks with owners of its chartered ships to cut leasing rates, whose outcome may come out later this week.

High charter rates, the creditors and the government believe, are worsening the shipper's financial health, and a cut in the leasing rates is one of the key preconditions for the survival of the shipper.

Hyundai Merchant paid a total of 1.9 trillion won to 22 owners of chartered ships last year, which accounted for 32 percent of its annual sales of 5.8 trillion won.

Creditors have also demanded that the shipper be included in a global shipping alliance to stay competitive.

Hyundai Merchant may be excluded from joining a group of shipping lines unless it cuts its charter rates and reschedules its debt.

Hyundai Merchant claims that its inclusion into a global shipping alliance will be guaranteed if it successfully completes talks over the charter rate cuts and its debt recast is approved by its creditors and bondholders.

Hyundai Merchant and other local shipping lines have been grappling with a glut of ships and the subsequent falls in freight rates. (Yonhap)