(TrendHub KR – Posts by ICARUS Reporter) Polaris Shipping, a mid-sized bulk carrier company in Korea, is currently facing a severe crisis in its sales process. Woori Private Equity (PE), selected as the preferred negotiator for the sale, is experiencing significant difficulties in raising acquisition funds, a situation largely attributed to the legal risks surrounding Polaris Shipping.
According to the investment banking (IB) industry on the 24th, HMM decided not to participate as a Limited Partner (LP) in the project fund formed by Woori PE for the acquisition of Polaris Shipping. Initially, HMM and Korea Ocean Business Corporation had planned to invest 60 billion KRW and 40 billion KRW, respectively, in the project fund created by Woori PE. However, this plan was halted due to the uncertain management situation of Polaris Shipping.
Polaris Shipping has been embroiled in legal issues since the sinking of the Stellar Daisy in 2017, leading to trials for the company’s management and employees. Polaris Shipping is also undergoing maritime adjudication, which investigates the causes of ship accidents and, if negligence is found, can issue various orders such as corrective actions or suspension of qualifications. An industry insider mentioned that Polaris Shipping could even face a business suspension order, depending on the outcomes of the management trials and maritime adjudication.
The ongoing sale process of HMM also influenced the decision of the Industrial Bank of Korea (KDB), which considered the situation comprehensively before withdrawing its plan to invest in the fund. The Korea Ocean Business Corporation has not yet decided whether to proceed with the investment, and there is a negative current internally.
The change in funding plans has put Woori PE in an emergency situation. With news that KDB and the Korea Ocean Business Corporation have withdrawn their investments due to the unstable management situation of Polaris Shipping, it has become challenging to find new investors willing to inject 100 billion KRW into the fund immediately. There are also talks within Woori Financial Group of a negative view towards this deal.
Founded in 2004, Polaris Shipping specializes in transporting raw materials and dry bulk. The company transports bulk goods like iron ore and coal from Brazil, Australia, and South Africa to Korea and China. Polaris Shipping has been carrying out the sales process since last year, having appointed Lazard Korea as the sale organizer. The sale includes 80.52% of shares held by Polaris Energy & Marine, 13.62% by NH PE-Ineous PE, and shares held by co-CEOs Kim Wan-Jung and Han Hee-Seung, amounting to 100% of Polaris Shipping’s stakes.
This situation could have significant implications for investors related to the shipping industry, necessitating close monitoring of the developments surrounding the fate of Polaris Shipping.
Dual Insight Analysis:
- Positive Investment Perspective: If Polaris Shipping overcomes its current legal issues and management difficulties, it could turn into a long-term investment opportunity. Especially if the company successfully implements new strategies in fundraising and operations, the potential growth and profitability could be attractive to investors. Being central to international trade and economic activities, if companies like Polaris Shipping get back on track, it could positively influence the entire shipping industry.
- Negative Investment Perspective: The current legal issues and management instability increase the investment risk in Polaris Shipping. With the company’s future uncertain, investors may have to bear high risks. The intense competition and market volatility in the shipping industry could negatively impact the long-term growth prospects of companies like Polaris Shipping, thereby increasing investment risks.
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