Sunday, March 29, 2020
Creditors Unanimously Rejected to Aid Hanjin Shipping
Into Court Receivership
Creditors Unanimously Rejected to Aid Hanjin Shipping
  • By Michael Herh
  • August 31, 2016, 01:45
Share articles

Creditors decided not to give further supports to Hanjin Shipping on Aug. 30.
Creditors decided not to give further supports to Hanjin Shipping on Aug. 30.

 

Korean shipping firm Hanjin Shipping Co. will be put under court receivership.  

According to financial regulators and creditors on August 30, creditors decided to refuse to give further supports to Hanjin Shipping on the day. Creditors of Hanjin Bank made the decision after discussing the end of a voluntary agreement with Hanjin Shipping after holding an emergency meeting at the Korea Development Bank at 11 am on the day. “Creditors unanimously agreed not to continue a voluntary agreement with Hanjin Shipping with a self-rescue plan submitted by Hanjin Shipping,” said a representative of the creditors.    

Their decision made the court receivership of Hanjin Shipping inevitable. The creditors said that they will be able to support Hanjin Shipping’s normalization only if the ailing shipping company additionally prepares at least 600 billion won (US$521 million). But Hanjin Shipping demanded additional support from the creditors, saying that they could collect 500 billion won (US$434 million) only. The creditors estimated that Hanjin Shipping will lack 1 trillion won (US$869 million) to 1.3 trillion won (US$1.13 billion) within next year and if its fare falls from the current level, the figure will swell to 1.7 trillion won (US$1.47 billion).    

The creditors showed subtle moves before a meeting on deciding whether or not they will put an end to the voluntary agreement with Hanjin Shipping on August 29. Even though the Korea Development Bank had a firm position that Hanjin Shipping’s self-rescue plan was far from being satisfactory, some expected that the government will make a decision to give the shipping company additional support for fear of a great logistics disturbance.   

But in the morning of August 30, the creditors clarified its position. It was said that top decision makers reached a conclusion about giving the creditors the right to make the final judgment on Hanjin Shipping. Woori Bank to be privatized and NH Nonghyup suffering losses clearly expressed their objection to giving additional support to Hanjn Shipping. KEB Hana Bank which once considered conditional acceptance made a sudden change to agree with Woori Bank and NH Nonghyup.  

The reason why the creditors raised the stakes to let the largest shipping company of Korea go under primarily because the amount of money that they will deliver according to the self-rescue plan was very insufficient but secondarily because a role was played by their profound mistrust of the shipping company plagued by financial trouble, too. “The creditors came to a conclusion that they could not continue to maintain a business relationship with Hanjin Shipping while watching the company played the media such as blaming the creditors only over additional support via the shipping association,” said a high-ranking representative of the creditors.

Financial regulators hit hard by the DSME incident walked away from the Hanjin Shipping issue. “Financial regulators can hardly intervene in the Hanjin Shipping issue at a time when they are receiving the shockwaves of the DSME incident such as the prosecution’s probe of the scandal,” said a representative of the creditors. In fact, those in charge of restructuring among the financial authorities already formed a consensus that it will be impossible to get Hanjin Shipping out of the snowballing trouble. The government authorities were very displeased with Hanjin Shipping that did not begin preemptive restructuring unlike Hyundai Merchant Marine. 

Government organizations in charge of the shipping industry such as the Ministry of Maritime Affairs and Fisheries worked hard to save Hanjin Shipping at the eleventh hour only to fail. Most of all, as Hanjin Shipping’s self-rescue plan was far from being satisfactory, the govern authorities could not justify additional support. There was a lack of money of a whopping 500 billion (US$434 million) to 800 billion won (US$695 million). As Hyundai Merchant Marine restructured earlier than Hanjin Shipping secured necessary liquidity thanks to its self-rescue efforts such as selling off its shares of Hyundai Securities amounting to 1.2 trillion won (US$1.04 billion), the government authorities said that they could not give inordinate favors to Hanjin Shipping only.

The creditors finished the meeting at the Korea Development Bank within 30 minutes on the day. “Hanjin Shipping has 650 billion won (US$565 million) in trade arrears such as oil expenses at the moment. Even if new funds of 699 billion won (US$607 million) are put into the company, they even cannot make up the arrears,” explained a representative of the Korea Development Bank in the meeting. At that moment, the creditors held their tongues and unanimously agreed on the decision not to provide any additional help to Hanjin Shipping.