Delayed Normalization
The Hanjin Group’s response to the receivership of Hanjin Shipping is not going well. The group came up with a countermeasure worth 100 billion won (US$86.9 million) on September 6, but it is concerned that unexpected events will impede the response during the course of the actual spending of the money.
Korean Air held a board meeting in the morning of September 8 to discuss the issue but failed to reach any conclusion. According to the Hanjin Group’s released on September 60 billion won (US$52.1 million) out of the total internal reserves of Korean Air is to be mobilized for Hanjin Shipping with its subsidiary Total Terminals International’s shares provided as security. However, outside directors at the meeting called into question the appropriateness of taking as security the asset of the company in receivership. Korean Air is going to have another board meeting on September 9 on the same issue that might negatively affect its financial situation.
The rest of the 100 billion won (US$86.9 million) is to be derived from the private property of Hanjin Group chairman Jo Yang-ho. The chairman is planning to prepare the money of 40 billion won (US$34.7 million) by taking out a loan on the security of Hanjin KAL Holdings shares. This process takes time though.
Debtor-in-possession (DIP) financing by creditors, which had been expected to become another lifeline for Hanjin Shipping, went up in smoke on September 8. The court had sent the Korea Development Bank a request for DIP financing on September 7 but the government and the creditors decided to turn down the request. “The court said that a total of 200 billion won (US$173.9 million) would be necessary but we have reached a conclusion that 100 billion won to be prepared by the Hanjin Group will be enough to resume unloading operations and address the situation in the short term,” one of the creditors explained, adding, “It is not appropriate to spend tax money to pay the company’s debt with the company unlikely to come back to normal.”
In the meantime, the Korea International Trade Association announced in the morning of September 8 that the total export losses attributable to Hanjin Shipping topped US$100 million in relation to 220 cases and 219 companies.