Bondholders brace for $1bn losses from Hanjin’s collapse

Bondholders brace for $1bn losses from Hanjin’s collapse

Plenty of companies and individuals are set to suffer large losses from their investments in South Korea’s Hanjin Shipping, a carrier that was finally declared bankrupt by a court in Seoul on Friday.
Yonhap, South Korea’s top newswire, warns bondholders face up to KRW1.2trn ($1.05bn) in losses with lead creditor state-backed Korea Development Bank (KDB) likely to shoulder the biggest losses.

Hanjin Shipping sought court protection at the end of last August with debts of more than $5bn. Its end marks the largest bankruptcy in container shipping history. Since August most of its assets have been put up for sale. Creditors now have until May 1 to submit claims.

Moody’s Investors Service, meanwhile, has issued a report maintaining that Hanjin’s creditor banks are well-reserved to cover this gigantic bankruptcy.

“The bankruptcy declaration is credit neutral for Hanjin Shipping’s creditor banks because they were already nearly 100% provisioned against their exposures and now, no longer face the risk of having to extend further credit to sustain the company, thereby capping their losses to current exposures,” Moody’s noted.

The creditor banks comprise three policy banks and four commercial banks that together have an exposure to Hanjin Shipping of KRW1.06trn ($923m), or 11 basis points of their risk-weighted assets as of June 30 last year. The policy banks, The Export-Import Bank of Korea (Aa2 stable), KDB and NongHyup Bank (A1/A1 stable, baa3), together account for around 77% of the banks’ total exposure to Hanjin Shipping. After Hanjin Shipping filed for court receivership, these three policy banks reclassified their Hanjin Shipping exposures as estimated losses and in the second half of 2016 set aside nearly 100% provisioning against these loans. Hanjin Shipping’s bankruptcy will therefore have a minimal effect on their profitability and capital ratios.

Exposures at the commercial banks, which accounted for 23% of Hanjin Shipping’s bank borrowings, are relatively small and also well provisioned, Moody’s reckoned These banks are Kookmin Bank (A1/A1 stable, baa1), KEB Hana Bank (A1/A1 negative, baa1), Woori Bank (A2/A2 stable, baa3) and Busan Bank (A2/A2 negative, baa1).

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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