Hanjin Shipping submits self-rescue plan
Hanjin Newport Corp. CEO Jung Se-hwa, right, touches his forehead at an emergency meeting regarding the restructuring of the shipping industry held at the Ministry of Oceans and Fisheries in Sejong City, Monday. / Yonhap
Company files for creditor-led debt restructuring program
By Yoon Ja-young
Hanjin Shipping filed for a creditor-led debt restructuring program, Monday, submitting a self-rescue plan.
The creditors, however, demanded that the troubled shipping company come up with more detailed measures to cut its debt and ship rental costs, bank officials said.
Hanjin Shipping said it filed with its main creditor, the Korea Development Bank (KDB), for the restructuring program.
Hit by falling freight rates amid the global economic slump and high ship charter costs, the nation’s leading container carrier has been sitting on snowballing debt.
“We received a self-rescue plan from Hanjin Shipping, but we demanded that it come up with a better plan as it lacked details regarding ship rental fee negotiations,” a KDB official said.
“On top of a drastic self-rescue plan, the company must persuade foreign ship owners to cut their exorbitant charter fees as this holds the key to survival for the company.”
The self-rescue plan includes a written pledge by Hanjin Group Chairman Cho Yang-ho to give up managerial control over the shipping company.
Hanjin Shipping had been run by Cho’s younger brother Soo-ho until he died in 2006 November, when his wife Choi Eun-yeong took over management.
She handed over the troubled company to her brother-in-law in April 2014, and now Hanjin Group’s Korean Air Lines is the largest shareholder of Hanjin Shipping with a 33.23 percent stake.
Worsening external conditions, however, put the company in trouble, and it has to pay off or refinance 500 billion won in debt by the first half of this year.
The company prepared the restructuring plan to get approval from its creditors for a bank-led debt rescheduling program and deferring payback of loans. Its total debt amounts to 5.6 trillion won, including 3.2trillion won in ship-backed loans and 1.5 trillion won in bonds.
It also hopes to negotiate with ship owners from Greece and other countries to cut ship rental fees, and also request debt restructuring from private creditors.
Some creditors demand that the owner family show sincerity to share the burden.
In the case of Hyundai Merchant Marine, its former Chairwoman Hyun Jeong-eun borrowed 30 billion won from banks by offering her equities as collateral to pay back some of the company debt.
Its self-rescue plan was approved by creditor banks, and it is currently negotiating with ship owners to cut rental fees by around 20 to 30 percent.
Cutting fees is crucial for the shipping companies to get back on track as many of the contracts they signed before the global financial crisis. Global freight fees have halved since 2010, but Hanjin Shipping has to pay around 1 trillion won a year in rental fees.
Former Chairwoman Choi and her two daughters, meanwhile, are being investigated by the financial regulator, over a suspicious selloff of their shares in the company.
They sold their entire 0.39 percent stake in the firm between April 6 and 20, and the financial regulator is examining whether they used undisclosed information in the sale to minimize their losses. The share price of Hanjin Shipping fell by its daily limit, Monday, following news that the owner family was facing an investigation by the Financial Services Commission.
KDB said it will hold a creditors meeting regarding the self-rescue plan following the submission of supplementary materials by Hanjin Shipping, which they will then determine whether to approve.