Still Long Way to Go

A U.S. court granted a stay order on September 9 (local time) to prevent creditors from seizing Hanjin Shipping’s ships or property, easing a cargo bottleneck resulting from the container line’s filing for bankruptcy protection. However, there are still many problems left.

The company needs to pay hundreds of billions of won for goods to be unloaded from its container ships, except for four U.S.-bound ones that began unloading. So, it remains unclear as to whether Hanjin Shipping can actually unload goods from its 40 vessels if it is granted a stay order from courts. An estimated 170 billion won (US$153.71 million) is required to cover the cost of unloading the remaining vessels.

In addition to the U.S., courts in Japan and the United Kingdom have granted protection from creditors to ships run by Hanjin. The carrier is also granted a provisional stay order, which protects its vessels from being seized, in Singapore. The government plans to seek stay orders in other countries, such as Germany and Spain, early next week.

Twenty of 97 Hanjin container vessels finished unloading – 10 at ports in Korea and another 10 in China, Vietnam and Middle East. Except for 36 vessels that the company will recall to Korea, the government said 41 vessels still remain in limbo. The cash-strapped shipping company needs an estimated 170 billion won (US$153.71 million) to complete the unloading.

To help unload cargo stranded on Hanjin ships, Hanjin Group Chairman Cho Yang-ho plans to provide 40 billion won (US$36.17 million) after taking out personal loans against his shares. Moreover, Korean Air Lines, Hanjin Shipping's biggest shareholder, had a plan to provide 60 billion won (US$54.25 million). The support will be offered on condition of securing Hanjin Shipping's Long Beach Terminal as collateral. However, it is now uncertain whether Korean Air can provide 60 billion won (US$54.25 million) as its outside directors insists on acquisition of the collateral by reason of breach of duty. 

An official from Korea Air said, “Although Hanjin Shipping owns a 54 percent stake in the Long Beach Total Terminals International (TTI), the company needs to acquire approval from six foreign financial organizations, which the company took out loans from, and the other stakeholder in the terminal – Mediterranean Shipping Co (MSC) with a 46 percent stake. So, it is true that it would be difficult to provide the money but we will make an every effort to do so.” 

The government also believes that the key is whether the company can raise the unloading costs. Accordingly, it will set up a cooperative system with the court and relevant authorities and actively work together with Hanjin Shipping, Hanjin Group and creditors.

In addition, the government will continuously increase the number of replacement vessels in order to help Hanjin Shipping to carry goods awaiting shipment. It has secured a number of replacement vessels. Earlier, it planned to inject 13 vessels – four bound for the U.S. and nine bound for Europe. The government now added 11 more ships bound for Southeast Asia and an increasing number of foreign ship owners are also participating in the plan.

Copyright © BusinessKorea. Prohibited from unauthorized reproduction and redistribution