SEOUL, KOREA - Conti Group of Germany has sold off the 560-billion-won accounts receivable of Pan Ocean to a third party, which will relieve the debt burden of the Korean company significantly.

 

With this transaction, Pan Ocean could eliminate uncertainties in the process of the workout program. According to sources on August 17, Conti Group sold the unpaid ship rental fees of US$550 million owed by Pan Ocean to Deutsche Bank and Hong Kong-based investment bank SC Lowy Financial Ltd. The discount rate was estimated at 60-70 percent, which makes the transaction price at around $200 million.

 

Investment bankers said the latest debt sell-off by Conti will accelerate the sell-off process for Pan Ocean. That's because it is hard for a company under a workout program to sell itself when the uncertain part of its debt is too high, which makes it difficult to determine the sale price. The buyers of the Pan Ocean debt, Deutsche Bank and SC Lowy Financial, did it in anticipation of value appreciation after the ownership of Pan Ocean changes hands.

 

A similar deal was made when Jinro was sold to Hite at the price of 3.4 trillion won in 2006. At the time, foreign investment banks involved in the deal reaped a significant sum of profit. An investment banker said, "Although there are still uncertain debts left, the remaining debt is estimated at 1.2-1.5 trillion won after a debt-to-equity swap on 67 percent of the debt."