Hanjin Shipping submits self-rescuing plan with creditors

By Jhoo Dong-chan

Hanjin Shipping, which has been struggling to stay afloat under mounting debt, submitted a self-rescue plan to creditors, Thursday.

According to financial circles, the plan, which hinges on tentative negotiations over reducing charter fees and securing liquidity, was submitted to the ailing shipping company’s main creditor, the Korea Development Bank (KDB).

The main issue is Hanjin Shipping’s drained liquidity, under which its remaining loans, reportedly worth up to 1.2 trillion won, are set to mature next year.

Hanjin Group, the beleaguered shipper’s mother company, has requested further financing from creditors while offering to supply the shipper with 400 billion won through capital increases by issuing new stock.

However, creditors have refused the group's offer, conditioning "at least 700 billion won" for such a request. If the group offers below 700 billion won, creditors have said the shipper will go into court receivership.

Industry observers expect Hanjin Group to offer more than 500 billion won in the self-rescue plan this time.

The KDB and other creditors are expected to meet on Friday to discuss whether to support the shipping company’s management normalization or hand it over to court receivership.

“Now, it’s up to the KDB and creditors,” an industry insider said. “It takes some time to conclude the decision. I believe now it’s a 50-50 chance whether Hanjin Shipping goes into receivership.”

Some experts say it is unlikely creditors will push the shipper through a de facto bankruptcy process.

“It is the nation’s largest shipper,” one said. “They won’t just give in to the company if considering the consequences.”

As part of its efforts to secure liquidity to stay afloat, Hanjin Shipping sold its 21 percent stake in Tan Cang Cai Mep International Terminal in Vietnam for 23 billion won to Hanjin Transportation, a parcel delivery company also under Hanjin Group. It also sold a bulk carrier to H-Line Shipping for 14 billion won and its H-Line Shipping stake for 33 billion won.

In June, it sold its trademark rights to Hanjin Kal for 74.2 billion won and operating rights on eight Southeast Asian routes for 62.1 billion won. The company also sold its London and Tokyo offices for 32.2 billion won and 8.2 billion won, respectively. Through the selling spree, the company has so far secured 267.7 billion won.

Hanjin Shipping is also expected to reach an agreement with its 22 ship owners to reduce charter fees by 25 percent to 27 percent, another condition for its management normalization the KDB and other creditors ask of the shipper.

Seaspan Corp., a major ship owner, has reportedly shifted its stance, positively reviewing a reduction in its charter fees to Hanjin Shipping.

Hanjin Shipping has been chartering 47 container ships and 13 bulk carriers. Of them, Seaspan Corp. has the largest number on charter to Hanjin Shipping, with seven 10,000 20-foot equivalent unit (TEU) ships.