Hanjin Shipping Faces de Facto Bankruptcy
By Jhoo Dong-chan
Hanjin Shipping will likely go into court receivership as the Korea Development Bank (KDB) and other creditors remain unwilling to extend more funds to the ailing shipping firm, according to analysts, Friday.
This comes as creditors continue to reject Hanjin's self-rescue plans, calling on the firm to make more sacrifices in exchange for much-needed cash. They are even urging Hanjin Group Chiarman Cho Yang-ho to offer his personal assets for sale.
But a Hanjin Group official said the plan presented to creditors Thursday was its best offer.
"We have nothing to offer any more in aiding Hanjin Shipping," he said. "We don't even plan to submit a follow-up self-rescue plan."
On Thursday, Hanjin Group offered 550 billion won ($494 million) in the plan but KBD and other creditors reportedly rejected it.
"It is very disappointing," a KDB official said during a media briefing, Friday. "We and other creditors expected some progressive developments in the self-rescue plan submitted on Thursday.
"The self-rescue plan says the group will first input 400 billion won through a capital increase by issuing new stock, and will offer an additional 100 billion won if there is a shortage. Considering its remaining loans, it is necessary for creditors to fund the shipping company with around 600 billion won by the end of this year."
The nation's largest shipping line has loans of up to 1.2 trillion won that are set to mature next year.
Hanjin Group has requested further financing from creditors while offering to supply the shipper with 400 billion won through capital increases.
However, creditors have refused the offer, wanting "at least 700 billion won" to consider such a request. If the group offers below 700 billion won, creditors have said the shipper will go into court receivership.
A finance insider said court receivership is likely.
"Creditors seemed to expect at least 600 billion won in the self-rescue plan," he said. "If the group now has no room to finance its beleaguered shipping affiliate, court receivership will be inevitable."
Shares of Hanjin Shipping were up Thursday over expectations the company might be able to stay afloat with the plan submitted to creditors. But after the plan's reported rejection, the shares nosedived nearly 12 percent Friday.
In a bid to secure liquidity, 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 the Hanjin Group. It 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.