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Korea Development Bank (KDB) has decided to help Korean Air Lines, the largest shareholder of Hanjin Shipping, inject money into the carrier.
Korea Development Bank (KDB) has decided to help Korean Air Lines, the largest shareholder of Hanjin Shipping, inject money into the carrier.

 

Korea Development Bank (KDB) has decided to financially support Hanjin Shipping in order to help Korean Air Lines Co. inject money into its subsidiary Hanjin Shipping. Korean Air, the biggest shareholder of Hanjin Shipping, has been struggling to provide funds to the carrier due to the opposition from outside directors concerned about being implicated on criminal charges of negligence in duty.

When Korean Air sets up the amount of loans secured by Hanjin Shipping's accounts receivable, KDB will provide a shortfall within the limit of 600 billion won (US$54.5 million). As the prolonged logistics crisis adversely affect the national economy as a whole, the state-owned policy bank has decided to back down from its previous stance to stop backing Hanjin Shipping.

According to shipping industry sources on September 21, Korean Air and KDB have decided to provide 60 billion won (US$54.5 million) to Hanjin Shipping together and are now in a final round of talks over detailed plans. For instance, when outside directors of Korean Air agree to inject 50 billion won (US$45.41 million) into Hanjin Shipping, KDB provide the remaining 10 billion won (US$9.09 million).

Korean Air came up with the measures to provide 60 billion won (US$54.5 million) in rescue fund to Hanjin Shipping on the 6th, but help from the flagship airliner was delayed for over 15 days due to the opposition from its outside directors.

An official from creditors said, “Korean Air providing 60 billion won (US$54.5 million) is the best scenario. But, it is not easy to do so due to controversy over the breach of trust. In a bid to address the logistics crisis first, KDB are now in talks with Korean Air to provide money to unload cargo.”

Lim Jong-ryong, chairman of the Financial Services Commission, also said at the job fair held at the CEOX in Samsung-dong, Seoul, on the same day, “We will let KDB, the main creditor of Hanjin Shipping, financially support the cash-strapped firm if needed.”

Korean Air plans to provide internal reserves secured by Hanjin Shipping's accounts receivable. Previously, the airliner planned to hold Hanjin Shipping’s Long Beach Terminal as collateral, but changed the plan since it failed to receive approval from foreign financial institutions which already have the security rights. Hanjin Shipping's accounts receivable are estimated to be around US$200 million (220.2 billion won). However, KDB and Korean Air think that they cannot provide the entire amount of 60 billion won (US$54.5 million) since it is hard to evaluate the value of security. KDB hasn’t decided the method to support Hanjin Shipping yet.

 

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