Hyundai Group, which is struggling to offload debt of its key affiliate Hyundai Merchant Marine Co., breathes a sigh of relief after KB Financial Group Inc. was named as the preferred bidder for a controlling stake in Hyundai Securities Co.

The South Korean business group is now able to repay maturing debt for the shipping unit as KB Financial Group is reported to have offered 1 trillion won ($874.2 million) for a 22.56 stake in the brokerage arm that nearly doubled from the market’s initial estimate of 650 billion won amid fierce competition between two potential bidders -- KB Financial Group and Korea Investment & Securities.

If the deal is realized, Hyundai Merchant Marine, the largest shareholder of Hyundai Securities, could repay most of its 400 billion won debt borrowed last November from sister company Hyundai Elevator Co. with its interest in the brokerage as collateral. The remaining proceeds would be used to cover imminent payables owed to customers. The shipping company also owes banks a staggering 4.8 trillion won in debt, but it would ask for more time to repay the debt.

A Hyundai Group official said KDB and other creditor banks already agreed to roll over 1.3 trillion won bonds on maturity date by another three months. “We will do our best to extend the maturity of other bonds worth up to 900 billion won.”

Critics say it may be too early to feel any relief because future negotiations with KB Financial are uncertain and a binding agreement has yet to be signed. Moreover, the proceeds, if successful, would come in during the second half of this year. Still, Hyundai Merchant Marine has to meet the conditions set by KDB. Creditor banks have requested the company to lower lease fees of vessels borrowed from third-party owners by the end of June in return for debt extension. Hyundai Merchant Marine plans to complete the lease fee issue by mid-April.

Meanwhile, the selection of KB Financial Group as a preferred bidder is cheering Hyundai Securities employees as they believe the deal would not trigger massive layoffs because of different market segments between KB Financial and Hyundai Securities.

By Yoon Jin-ho, Kim Tae-joon

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]