Hanjin Shipping may face court receivership

Korea’s top shipper Hanjin Shipping may face court receivership this week while the government and the finance sector are preparing for measures against the possible aftermath.

On Thursday, Hanjin Group submitted a rescue plan that planned 400 billion won ($358 million) of funds from Korean Air and 100 billion won from other Hanjin’s affiliates and Hanjin Group Charman Cho Yang-ho’s private account.

The creditors, including the main creditor Korea Development Bank, however, expressed disappointment in the rescue plan, claiming that the amount is nearly the same as the previous plan suggested earlier.

“The 100 billion won is practically a preparatory amount. Only the 400 billion won fund is realistic,” said Jeong Yong-seok, the deputy governor of restructuring at Korea Development Bank.

The creditors have demanded that the group inject at least 1 trillion won, considering the seriousness of the circumstances.

If the creditors continue the joint management that they initiated in May, they would have to additionally shoulder up to 1.4 trillion won of the financial burden by next year, the creditors said. The joint management is slated to end on Sept. 4.

The creditors will determine whether to send the company to the court on Tuesday.

If Hanjing Shipping is sent to the court, some speculate that the company will likely face bankruptcy as overseas shipowners will seek to seize the ships to take back their bonds while shippers will cancel the contracts.

The Korea Shipowners’ Association projected that about 17 trillion won of direct and indirect damage will hit the shipping business if the company becomes bankrupt.

Bond investors are also likely to face the financial damage as all the bonds and debts will become frozen once the company files for the court receivership.

As of late June, the balance of the bonds that the company issued reached nearly 1.2 trillion won.

The financial institutions, which provided loans to the ailing company, are also expected to face the blow but limitedly.

Local banks’ credit exposure to the cash-strapped company was found to be 1.02 trillion won but the banks have already set aside sufficient provisions against the loans, the banks said.

In order to minimize the aftermath in a worst case scenario, the Ministry of Maritime Affairs and Fisheries said it is setting up countermeasures for logistics.

By Lee Hyun-jeong (rene@heraldcorp.com)