The South Korean ocean carrier Hyundai Merchant Marine will be selling part of its fleet to receive fresh funding. The carrier signed a memorandum of understanding to that effect with a new state-run shipbuilding financing firm.

Under the deal, HMM will sell 10 container ships for $131 million to Korea Ship, the entity formed by the South Korean government to fund shipping companies and rescue them from financial ruin. The vessels have a book value of $739 million. The deal will be financed with sales of bonds and stock to the financing firm. The container ships may be leased back to HMM as part of the agreement.

Korea Ship will buy $87 million worth of HMM shares and $522 million worth of convertible bonds.

The carrier is also planning to place orders for five container vessels and two or three oil tankers later this year with the state-backed financing program.

A new shipping company created by South Korean state lenders for the expansion of terminals and fleets will be forking over $515 million to Hyundai Merchant Marine (HMM), a South Korean carrier and shipbuilder.

HMM will become the first beneficiary of Korean government rescue plans for companies in the maritime cargo transportation sector.

Korea Ship was launched last month with initial capital of $868 million from a group of South Korean government programs to revive the sinking shipping and shipbuilding industries. Ninety percent of the initial capital of the new state entity is coming from the Korea Development Bank and the Export-Import Bank of Korea, both state lenders, and the remainder from Korea Asset Management Corp. The program is designed to strengthen local shipping companies against slowdowns in the maritime sector.

HMM is currently under state bank management after it managed to come to an accommodation with its creditors last June. After reaching an agreement with owners of its chartered ships to cut leasing rates by 21 percent, saving the carrier $450 million, creditors agrees to reschedule $690 million in debt rescheduling, under which more than half the debt will be exchanged for HMM shares and the remaining debt will be paid back in two years. The creditors also agreed to swap $580 million in debt for stock, all in an effort to keep the carrier in business. Hyundai Merchant had debts of about $445 million as of the end of March 2016.

Korea Development Bank and other creditors had threatened that they would seek receivership for HMM if the carrier failed to achieve a charter rate cut and a debt rescheduling approved by bondholders. By contrast, Hanjin Shipping, also a South Korean carrier, was unable to reach an agreement with creditors and is now in the process of liquidation.