Hanjin Shipping files for court receivership
Members of port-related associations protest during a rally at Busan Port International Passenger Terminal, Wednesday. The groups, including Busan Port Transportation Union, claimed Hanjin Shipping’s collapse will devastate the port and urged the Korea Development Bank, Hanjin’s main creditor, to save the shipping line, which filed for court receivership on the same day. / Yonhap
Hyundai Merchant to take over core assets
By Nam Hyun-woo
Hanjin Shipping filed for court receivership on Wednesday, a day after its creditors denied fresh loans for the cash-strapped shipper.
Hours before the application, the government said it will have Hyundai Merchant Marine (HMM), another domestic shipping line currently undergoing its own normalization process, take over some of Hanjin Shipping’s core assets, so that Korea’s shipping industry would not lose its competitiveness in the global market.
According to Hanjin Shipping, six out of seven of the company’s board members decided to file for court receivership during their meeting at the company’s headquarters on Yeouido. Hanjin Group Chairman Cho Yang-ho was not present.
Following the decision, the world’s No. 7 shipper by capacity applied for receivership with the Seoul Central District Court. If the court accepts it, the company’s assets and liabilities will be frozen. The court will then decide whether to revive the company or dissolve it.
Given idling operations is critical to a shipping line, the asset freeze will likely deal a heavy blow to the company’s value, trimming the chances for the court to keep the company afloat. This will likely prompt the company’s exclusion from shipping alliances which is tantamount to losing business ground.
As the company’s total debt amounts to about 5.6 trillion won ($5 billion), the shipper has outstanding loans of 1.3 trillion won that are set to mature next year. Of them, 650 billion won is required to aid the company immediately this year.
The company had sought to reschedule debt payments under a creditor-led program. However, main creditor Korea Development Bank (KDB) on Tuesday rejected the company’s self-restructuring proposal, saying “it was just not enough” to make up for the group’s cash shortage.
The aftermath came shortly after the rejection.
The company said a Singapore court seized one of the company’s vessels, the Hanjin Rome, in the Port of Singapore on Tuesday. Also, a number of ports in China, Spain and the United States have banned Hanjin vessels from entry.
More Hanjin ships are expected to be seized in ports around the world to collect port usage fees and other costs that Hanjin failed to pay.
The Korea Exchange, the nation’s bourse operator, on Tuesday suspended the trading of Hanjin Shipping shares.
The Financial Services Commission (FSC), the Financial Supervisory Service and other government agencies held a meeting where they said HMM will seek to acquire Hanjin Shipping’s “healthy” assets, including profit-making vessels, overseas business networks and key personnel.
“As Hanjin Shipping seeks court receivership, the country’s shipping industry is concerned about losing its competitiveness,” said FSC Vice Chairman Jeong Eun-bo. “By HMM acquiring Hanjin Shipping’s healthy assets, the industry can retain its competitiveness.”
The remark is interpreted as a de facto merger between the country’s top two shipping lines. A full merger will force HMM to shoulder Hanjin Shipping’s debt, so HMM will absorb the sound assets of Hanjin Shipping, according to the government. HMM went through its own self-restructuring efforts before Hanjin Shipping and now has KDB as its major shareholder.
As part of its self-rescue efforts, Hanjin Shipping has sold a quantity of its assets, including shares of a container terminal in Pyeongtaek, Gyeonggi Province, and a port in Busan, to its affiliates Korean Air and Hanjin Kal. The government sees that the remainder, such as profit-making vessels, business networks and other rights in seaways and ports are valuable for HMM to acquire.