Corporate Information

Of the 340 billion won in loans from 14 Meritz, 250 billion won early repayment... Most of them were replaced with new old ships

Polaris Shipping's rapid reduction in large loans raised by Meritz Securities last year has opened its management to ease. Earlier, Polaris Shipping had a financially urgent year, with discussions even taking place on the sale of management rights. Amid the industry's concerns, Polaris Shipping showed its true value by reducing large debts in a short period of time.

According to Polaris Shipping on the 7th, the company has repaid 250 billion won out of 340 billion loans raised from Meritz Securities early so far. The repayment was made with Polaris Shipping's own funds, but there was no prepayment fee, so the loan was repaid without additional expenses. It repaid 70 billion won at the end of last year and repaid an additional 180 billion won this year. The loan balance is about 90 billion won.

The annual interest cost that the company has to pay has been lowered from 42.5 billion won to 11.2 billion won. Meritz Securities loans have a maturity of two years and an interest rate of 12.5%. Due to its high interest rate and short maturity, it was a debt that Polaris Shipping had to resolve first. As Polaris Shipping and its holding company Polar Energy & Marine were also given as collateral, the delayed repayment of debts could lead to management risks again.

Early repayment of loans has great implications. This proves that stable profits are generated in the main job and that financial strength is also stable. As the interest burden on Polaris Shipping has also been visibly reduced, a green light has also been given to improving profitability.

◇ Solid performance has eased uncertainty

In 2023, Polaris Shipping pushed for the sale of management rights. At the end of the same year, negotiations were held with Woori PE to sell management rights, but the price negotiations went awry and it was scrapped. Last year, SG PE took the mound as a firefighter, but investment worth 300 billion won was canceled due to the failure of fundraising.

The EB repayment deadline for PE Consus was until September last year. As the deadline was just around the corner, Polaris Shipping joined hands with Meritz Securities in September last year to raise 340 billion won. This also ended the long relationship with NH PE-Aeneas PE.

Even in eventful situations, the performance in the main job was solid. Last year, consolidated sales amounted to 1.1914 trillion won, operating profit was 165.6 billion won, and EBITDA was 294.3 billion won. The high exchange rate was also a boon for polaris shipping. In 2023, sales were 1.2372 trillion won, operating profit was 203.2 billion won, and EBITDA was 329.8 billion won. Although it slowed compared to the previous year, cash generation remained.

The shipping industry variables this year are considered tough. The tariff war from Trump has begun in earnest, and the Bulk Freight Index (BDI), which can measure bulk carrier fares, has been on the decline since late last year. However, in the case of BDI, it is evaluated that it is difficult to regard it as a significant negative factor in the polaris shipping business structure.

An industry official said, "The BDI index should be viewed separately from the prehistoric container (COC) contract, and Polaris Shipping is making profits around COC contracts," adding, "Thanks to this, Polaris Shipping is far from the freight issue."

◇ A long time of hardship, management on track

Polaris Shipping has a rough history. In 2017, Polaris Shipping was hit by a major negative factor when the 'Stella Daisy' sank in the South Atlantic Ocean. Coincidentally, it was shortly after attracting investment from NH PE-Aeneas PE Consus.

Consus signed a main contract for free IPO investment with Polaris Shipping on March 29, 2017, and the balance was paid on the 31st of the same month. The very next day, on April 1, the news of the sinking of the Stella Daisy was announced in Korea.

The worst-case scenario unfolded not only for Polaris Shipping, which received the investment, but also for PE Consus, which had bet on the company. Since then, Polaris Shipping has continued to improve its constitution for a long time with PE, which has become a creditor from a financial investor (FI). At that time, the momentum was strong enough to push for a free IPO, but the listing was canceled in the aftermath of the accident.

For more than seven years after the bad news of the sinking of the Stella Daisy, Polaris Shipping was a difficult time. The company's performance is expected to be back on track in earnest from this year as the issue of repaying investment that has plagued the company has been resolved and the burden of loans from Meritz Securities has been greatly reduced.

Analysts say that the company's asset value has also increased at a time when cash generation is solid. This is due to the disposal of most of the existing old ships and the replacement of many ships with new ones. With the successful improvement of its constitution with a blue-chip financial structure, Polaris Shipping plans to address financial and management risks raised in the industry within this year.