Hanjin Shipping’s precarious financial position has killed off a bonds issuance from parent Korean Air. Investors have shied away from taking up the airline’s KRW250bn ($218m) bond offering, with local media and analysts suggesting its link to Hanjin Shipping was the main reason for the failure to raise capital.
Noh Sang-won, an analyst at Dongbu Securities, said that Korean Air faces risks due to a liquidity shortage at Hanjin Shipping.
“Despite expectations of improved earnings, its subsidiary risk remains a negative factor that can affect the value of Korean Air,” Noh wrote in a recent report, adding: “It is highly likely that Korean Air will further provide (liquidity) support to Hanjin Shipping.”
Korean Air has stumped up more than KRW800bn supporting the shipping line over the past three years. The airline holds a 33% stake in Hanjin Shipping. Hanjin, which has sold a number of assets recently, managed an operating profit of KRW266bn in the first quarter this year.
