Hanjin Shipping files for creditor-led restructuring
By Kim Jae-won
Hanjin Group Chairman Cho Yang-ho gave up his management control of the group’s shipping unit on Friday, leaving the heavily indebted shipper in the hands of creditors, bank officials said.
The board of Hanjin Shipping decided to file for receivership and give creditors authority to manage the company, bowing to calls from the government and its main creditor Korea Development Bank (KDB) which asked Cho to accept heavy restructuring of the company.
“Board directors of Hanjin Shipping decided to give up their management control for debt restructuring,” said a KDB spokesman.
The main creditors will discuss whether to put the company on a debt rescheduling program.
The announcement came a few days after KDB Chairman and CEO Lee Dong-geol visited Cho to discuss how to revive the shipping company. Finance Minister Yoo Il-ho also asked shipping companies to push for tough corporate restructuring.
Representatives at Hanjin were not available for comment.
Shipping companies are under heavy debt due to expensive rental fees paid to ship owners. The government is pushing the nation’s two players ― Hyundai Merchant Marine and Hanjin Shipping ― to cut the fees as they signed contracts establishing the prices with ship owners from the U.K. and Greece at a time when the industry was booming. So far, no good news has been announced.
Protective measures
Separately, Hyundai Heavy Industries (HHI) and other shipbuilders are also struggling to keep afloat. They plan massive layoffs as part of restructuring.
To provide a cushion against the imminent layoffs, the government plans to designate the shipbuilding industry as “a special employment sector,” seeking to help the thousands of employees facing unemployment.
The Ministry of Employment and Labor said that it is examining ways to support shipbuilding employees as they are in danger of losing their jobs hit hard by poor performance of the companies and low demand in the global markets.
“We are mulling offering special treatment of employees in the shipbuilding industry as they face strong corporate restructuring,” said a spokesman for the ministry. “They will be offered more subsidies and benefits.”
According to the ministry, if an industry is designated as a special employment sector, companies in that industry get additional subsidies for keeping their employees working. Workers are also paid more subsidies after they are laid off as well as receiving support for finding new jobs.
The announcement came amid HHI’s plans to cut 3,000 jobs, struggling to keep afloat after posting a combined 4.8 trillion won net loss over the last two years. HHI is set to announce its restructuring plan next week, including a 10 percent cut of its workforce, following a reduction of 1,300 jobs last year.
Creditors and Daewoo Shipbuilding and Marine Engineering (DSME) also agreed to cut the shipbuilder’s workforce by 2,000 to 11,000 by 2018, as part of the company’s restructuring program. The government is pushing DSME even further, pressuring the company to reduce its workforce by 3,000 in the near future.
Local shipbuilders are suffering from declining orders, according to data from a global researcher. Clarkson Research Services said Korean shipbuilders had combined orders of 27.59 million compensated gross tons (CGTs) as of end-March, the lowest since March 2004 when it had orders of 27.52 million CGTs.