Posted : 2014-02-06 16:46
Updated : 2014-02-06 16:46

Korean Air to gain Hanjin Shipping

Cho Yang-ho
Hanjin Group Chairman
Choi Eun-young
Hanjin Shipping Chairwoman

By Kim Rahn

Hanjin Shipping Chairwoman Choi Eun-young may hand over the company's managerial right to her brother-in-law, Hanjin Group Chairman Cho Yang-ho, industry sources said, Thursday.

The plan comes months after the group offered liquidity to the shipping firm, which has been experiencing a liquidity shortage in recent years amid a slump in the shipping industry.

According to sources in the financial industry, Hanjin Shipping's parent company, Hanjin Shipping Holdings, will be divided in two to set up a new corporate body.

The new entity will include Hanjin Shipping which will be overseen by Cho. Then Choi will retain control of the other half in addition to other affiliates of the holding company such as Hanjin Logistics, another logistics arm of the holding company; Cyber Logitec, an information technology unit; Hanjin SM, a ship management service provider; and Hanjin Shipping's building in Yeouido, central Seoul.

It is also rumored that all shares of the shipping arm held by Choi will be transferred to Cho including their respective managerial controls.

Korean Air, Hanjin Group's flagship unit, will participate in Hanjin Shipping's capital increase worth 400 billion won and make the shipping firm its affiliate during the first half of the year, according to the sources.

Once the stock exchanges and purchases are settled, Cho's group will become a comprehensive logistics company offering services ranging from air to land and sea transportation.

Industry watchers have long predicted that Cho would take control of Hanjin Shipping following Choi's decision to request a bailout from him last year.

Hanjin Shipping is formally an affiliate of Hanjin Group, but has operated independently from the group. Choi's husband and Cho's younger brother, Cho Soo-ho, ran the company but since his death in 2006, Choi has been at the helm and has sought a complete separation from the group, selling stakes in several of the group's core affiliates.

However, years of slump in the shipping industry and consequent liquidity shortages forced Choi to seek a bailout from Cho. Hanjin Shipping posted 242 billion won in operating losses last year, larger than the previous year's 109 billion won, marking three straight years of losses.

Korean Air under Cho then offered a total of 250 billion won in October and December. In return for the emergency loan, the airline took a 15.4-percent stake in Hanjin Shipping, held by Hanjin Shipping Holdings, as security. Cho also had his aid, Seok Tae-soo, become Hanjin Shipping's president, virtually controlling the company.

However, officials of Hanjin Shipping and Korean Air said talks of an imminent transfer of managerial control from Choi to Cho have not yet been confirmed.

"When we presented self-help plans in December, Hanjin Shipping, Korean Air and creditor banks agreed to devise measures to solve the financial trouble, and such managerial right transfer may be one of the options. It is under discussion for now but nothing has been confirmed," a Hanjin Shipping official said.

A Korean Air official also said the plan is one of the possible scenarios which the two companies and the creditor banks are considering.

  • 1. Major rail service disruptions due Tuesday as workers go on strike
  • 2. PyeongChang Olympics mark 500-day countdown
  • 3. AmorePacific's toothpastes recalled for banned chemicals
  • 4. [Konglish Buster] Reader nails misspelling of Korea's No. 1 national treasure
  • 5. Foreign prisoners nearly double in five years
  • 6. Instant noodles offer golden opportunity
  • 7. Scottish band to perform at Seoul's Zandari Festa
  • 8. Foreign bloggers see beauty of Dokdo
  • 9. Chinese media denounce N. Korea leader in rare harsh tone
  • 10. Vietnam airlines under watchful eyes in Korea for crew members' smuggling