As the days of Hanjin Shipping seem numbered, officials in Seoul are already talking about ways to have its local rival take over any valuable assets the beleaguered shipping firm still has.
Jeong Eun-bo, vice chairman of the Financial Services Commission, floated the idea in an emergency meeting early Wednesday morning. Hours later in the afternoon, Hanjin filed for court receivership, seen by many industry insiders as entering the inevitable path to bankruptcy.
“With Hanjin Shipping filing for court receivership, there is a worrying view that Korea’s shipping industry as a whole may lose its global competitiveness,” he said.
“We will actively push for the idea to have Hyundai Merchant Marine acquire Hanjin Shipping’s sound assets such as ships, routes, global networks and human resources.”
Hanjin, Korea’s No. 1 and the world’s No. 7 container carrier, which handles a big chunk of the country’s exports, is fast sinking under losses and unpaid debt, putting its clients -- major Korean exporters like Samsung Electronics -- as well as industry peers and government officials on edge.
Hyundai Merchant Marine, which ranks second locally and 14th globally, is in the same trouble as Hanjin and other global players, with its problems stemming from global overcapacity and the elusive recovery of marine trade.
Yet it is seen relatively better off now, with creditor-led restructuring of debt ongoing. HMM, after a protracted negotiation with shipowners, has managed to cut the fees it pays to them for the charted fleet while securing 1.2 trillion won ($1.08 billion) through the sale of its controlling stake in an affiliate. It also cut its capital by 87 percent to improve the balance sheet.
Hanjin Shipping, however, failed to win over creditors.
On Tuesday, the state-run Korea Development Bank, a main creditor, said the lender decided to withdraw all support for Hanjin, rejecting its proposal to raise 500 billion won in fresh funds as “insufficient” to cover the imminent cash shortage the company faces.
Hanjin would need 1 trillion to 1.3 trillion won in cash to roll over debt, it claimed.
Shares in the firm plunged to a six-year low Tuesday on news of the creditor cutting the lifeline. Trading was halted Wednesday.
Now, the Seoul Central District Court will decide the fate of Hanjin -- between a corporate rehab and liquidation -- but whatever the choice will be, Hanjin may have already suffered an irreversible hit in a global industry where even larger and healthier players are fighting for survival, experts said.
The firm is already seeing its vessels arrested by debtors overseas and denied access to some ports demanding Hanjin make advance payments in cash for service charges.
“More ship arrests are likely to follow. The firm is highly likely to be kicked out of the global shipping alliance as well,” an industry insider said.
Yang Chang-ho, a professor at Incheon National University, predicted that once shipping operations halt, Hanjin will be in a very difficult situation to make a return, even if the court decides on corporate rehab.
Hanjin Shipping, with 151 container and bulk ships in its fleet, including 59 it owns, handles 56 percent of Samsung’s electronic device shipments from Korea to the Americas and 23 percent of LG Electronics’ appliances.
Employing over 4,800 people worldwide, including 1,600 in Korea, it operates 90 itinerary routes between 90 ports around the world.
By Lee Sun-young (email@example.com)