SK Extends TRS Contract for 'SK Shipping Shares' by 5 Years... Listing Also Postponed

[Asia Economy Reporter Jang Hyowon] SK, the holding company of SK Group, has extended the total return swap (TRS) contract secured by SK Shipping shares with Samsung Securities for another five years. When the TRS contract was signed in 2017, the condition was set for SK Shipping to go public within five years, but as the listing effort failed, the TRS contract maturity has been extended again.

According to the investment banking (IB) industry on the 12th, SK Group extended the TRS contract with Samsung Securities for another five years, which was secured by 4,805,259 common shares of SK Shipping (approximately 18% stake) five years ago.

In 2017, SK Shipping was split through a physical division into the surviving company SK Maritime and the newly established company SK Shipping. The dedicated vessel and bunkering businesses, which can generate stable profits, were retained by SK Shipping, while non-performing assets remained with SK Maritime.

Along with the physical division, SK signed the TRS contract with Samsung Securities. SK Maritime transferred about an 18% stake in SK Shipping to Samsung Securities for 163 billion KRW and agreed to pay fees. A TRS contract involves paying a certain fee and interest to the securities firm, while the original owner bears or receives the profits and losses from the shares.

At that time, SK reportedly set the condition to list SK Shipping by 2022 when signing the TRS contract with Samsung Securities. If the listing failed, SK agreed to pay Samsung Securities the principal investment and the TRS premium.

SK also holds a call option (early purchase option before maturity) to repurchase the SK Shipping shares used as collateral for the TRS. If the listing fails within the deadline, it is interpreted that SK opened a channel for investors to recover their investment by exercising the call option.

However, even after five years, there has been no movement toward SK Shipping’s listing. Meanwhile, the owner of SK Shipping changed to Hahn & Company at the end of 2018, but the timing for listing has not been found due to slow recovery in performance.

As of the end of last year, SK Shipping’s consolidated sales amounted to 1.8973 trillion KRW, a 39% increase compared to the previous year. Compared to the shipping industry boom caused by rising logistics costs due to COVID-19, the sales growth rate is relatively low. During the same period, HMM’s sales increased by 119.5%, and Pan Ocean (93.5%) and Janggeum Shipping (79.3%) also showed significant growth.

The debt ratio has also been rising again since 2018. SK Shipping’s debt ratio dropped from 1015.8% at the end of 2017 to 452.8% in 2018, attributed to Hahn & Company’s focus on reducing borrowings. However, the debt ratio has risen again since then, reaching 689.9% as of last year.

This content was produced with the assistance of AI translation services.