KLC tries to shorten its debt through conversion into equity

Korea Line's 'Rose marie'

Korea Line Corp (KLC), a Korean shipping company, announce on March 19 that it has converted its debt into equity to lessen the scale of debt.

KLC decided to convert 4,065,782 shares into capital at 1 share per KRW 100,000. This decision was handed down from the court when KLC received accreditation for revival out of receivership from the court last October.

The accreditation includes a plan to settle KLC's debt by 33% through repayment in cash, and 67% through stock conversion. The object to be converted debt is a total of KRW 406.6 billion.

As an effect from the plan, KLC's debt decreases by 11.7% from KRW 3.4524 trillion to KRW 3.0458 trillion. On the contrary, the gap of the total capitalization narrowed by 26% from KRW -1.6007 trillion to KRW -1.1841 trillion.

A representative from KLC said, "Already suspension of payments for charterage has taken effect along with the court receivership, so some effects like financial expense are restrictive."

For such reasons, although the conversion has empowered KLC to revive the company, it still has a long way to go to survive. The Korean carrier still has over KRW 3 trillion of debt and negative 1 trillion of capital even after enforcing the stock conversion.

Also, the bulk carrier market has hit bottom - BDI recorded 874 points last March 16, which is markedly lower than the break-even point of 2,000 points. Because of these reasons, KLC saw KRW 233.8 billion in operating losses last year. < 김보람 기자 brkim@ksg.co.kr >