Hanjin Shipping shares suspended as creditors walk away

Hanjin Shipping shares suspended as creditors walk away

Hanjin Shipping’s shares were suspended today after slumping 29% after its restructuring plans were rejected by creditors, putting the nation’s top shipping line on the verge of bankruptcy. Calls are now once again growing for Hanjin Shipping to merge with fellow Korean line, Hyundai Merchant Marine (HMM).

“While Hanjin Group has shown some efforts to turn around, the owner hasn’t shouldered enough responsibility as head of the company,” Lee Dong Geol, Korea Development Bank’s chairman, said at a briefing in Seoul. “The voluntary debt-restructuring program is until September 4 and Hanjin Shipping will probably have to decide whether to file for court receivership.”

Hanjin Shipping has had to fix liquidity problems and settle lower charter fees with tonnage providers as part of steps laid out by creditors if it is to avoid court receivership.

A proposed injection of KRW400bn by sister firm Korean Air was deemed at least KRW200bn short by creditors, who note that Hanjin Shipping’s liquidity shortages top KRW1trn.

Hanjin Shipping had debt of KRW6.6trn won ($5.9bn) and a debt-to-equity ratio of nearly 850% at the end of last year.

Meanwhile, the Korea Shipowners’ Association (KSA) has come out in favour of pushing Hanjin to merge with HMM.

Kim Young-moo, executive vice-chairman of the KSA, commented earlier this week: “Hanjin Shipping should be normalised first and merge with HMM later in order to reduce costs and improve competitiveness. This is the best option for now.”

The KSA and the Federation of Korea Maritime Industries submitted the merger proposal to the government yesterday. To date, the government in Seoul has been strenuously denying any need or desire to merge the two lines. The head of South Korea’s Financial Services Commission, Yim Jong-yong, once again ruled out merger speculation when quizzed by journalists today.

“Hanjin Group have put its all efforts until the very last minute for the normalization of Hanjin Shipping, and it is very regretful to hear that the creditor banks have decided to end their financial support to Hanjin Shipping despite the positive cooperation among the foreign banks and charterers. Hanjin Group will do all its best in every way for the recovery of shipping business even if Hanjin Shipping enters court receivership,” a spokesperson for the line told Splash today.

Commenting on the news, Lars Jensen from Copenhagen’s SeaIntelligence Consulting mused today on the ramifications for THE Alliance, a new container grouping set to start operations next April. “This will potentially have a spill-over effect on the members of THE Alliance,” Jensen wrote in a note today. “Since the announcement of THE Alliance, they have seen Hyundai shift to the 2M alliance and in worst case they might also lose Hanjin. The loss of both Korean carriers will then reduce the size of THE Alliance by more than 20% before it is even launched. As the industry is all about scale, it must be of concern for the members that their alliance will the have reduced their size ratio versus Ocean Alliance from 84% at time of announcement to now potentially only 64%.”

 

Today’s Hanjin news has sparked plenty of conjecture about the future of the Korean line and also for the new container alliances. Join the debate among experts at our new interactive forum, Splash Chat.

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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