Struggling shipowner Hyundai Merchant Marine (HMM) has agreed to a KRW760bn ($640m) debt-for-equity swap with its creditors including Korea Development Bank (KDB), amid continuing talks to lower charter fees from shipowners.

HMM had debts of approximately KRW5.2trn as at end-March 2016, and the latest debt-for-equity deal will convert KRW760bn of HMM loans into the company shares, provided that charter fees are cut.

KDB, the lead creditor of HMM, agreed on Tuesday to the deal for HMM, but it remains crucial that HMM is able to come to a positive conclusion to reduce charter fees for its chartered-in vessels.

Talks are ongoing to renegotiate the charter contracts as HMM seeks to stave off court receivership.

“The conditional debt-equity swap proposal means that the swap won’t happen if HMM fails to produce meaningful cuts in charter fees,” a KDB official told the Korea Herald.

Charter fees were a major financial burden on HMM’s balance sheet as the company paid a total of KRW1.9trn to 22 shipowners. Of the 124 ships HMM operates, 85 are chartered-in.

On the debt restructuring front, HMM still needs the nod from bondholders to extend the maturity of debts worth KRW800bn. Bondholders’ meetings are scheduled for 31 May and 1 June.

In a previous meeting, bondholders had rejected a proposal to extend KRW120bn worth of maturing debts.