The future of South Korea’s largest container shipping company looks grim, with numerous media outlets reporting lenders are refusing to extend the company additional credit.
The future of Hanjin Shipping looks grim, with numerous media outlets reporting lenders are refusing to extend additional credit to South Korea’s largest container shipping company and the seventh largest in the world.
“The Korea Development Bank (KDB) said Tuesday that it and other creditors unanimously decided not to supply Hanjin with more rescue funds,” South Korea’s public international broadcaster KBS World Radio said. “The decision follows the creditors’ expression of dissatisfaction over the shipping company’s earlier self-help measures to ease its financial difficulties. As a result, the troubled shipping company will likely be placed under court receivership soon.”
Meanwhile, the Yonhap news agency quoted remarks from KDB CEO Lee Dong-geol as saying at a press conference, “We have reached the conclusion that we cannot accept (Hanjin)’s request for fresh funds, though both sides made efforts to narrow differences.”
Yonhap added that Lee compared fresh cash injections as “pouring water into a broken jar.”
Yet the Korea Times said when Lee was asked whether creditors could resume talks with Hanjin over steps to keep the company from going under court receivership, he said, “It’s uncertain. Still, creditors will do their utmost.”
A source told American Shipper Hanjin had not taken any court action yet and if it did, it is unclear whether it would be for receivership and whether the company would seek Chapter 15 protection. A decision by Hanjin on what action to take is expected Wednesday morning in Korea.
The website for the U.S. federal judiciary explains, “Chapter 15 is a new chapter added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. It is the U.S. domestic adoption of the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law (UNCITRAL) in 1997.”
It says, “The purpose of Chapter 15, and the Model Law on which it is based, is to provide effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants and other parties of interest involving more than one country.”
An unnamed KDB official quoted by the Korea Times said, “Of the total outstanding loans, Hanjin Group said it can only finance 30 to 50 percent of the shortage. The 1.3 trillion won debt could stretch to 1.7 trillion won in the worst case. Creditors decided not to take such risks.”
An executive at one of the alliance partners of Hanjin said that his company was no longer putting cargo on Hanjin ships.
Hanjin is a member of the CKYHE Alliance along with China’s COSCO, “K” Line of Japan, and Yang Ming and Evergreen Line, which are both based out of Taiwan.
A photo of a customer advisory from United Arab Shipping Co. (UASC) that was posted on Twitter read, “In reference to media reports stating a potential bankruptcy of Hanjin Shipping, we are closely monitoring the situation to ensure your cargo is protected. UASC confirms we are in vessel and slot sharing agreements with Hanjin and are engaged in emergency contingency planning of containers, which might be onboard Hanjin Shipping’s vessels.”
A senior liner executive said if Hanjin does declare bankruptcy, he thought it would be the largest reorganization of a liner company since the bankruptcy of U.S. Lines in 1986.
Such a filing would also present many new challenges, he noted, because vessel sharing alliances, at least of any scale, did not exist at the time of the U.S. Lines reorganization.
Min Park, a spokeswoman for Hanjin Shipping, said Hanjin Group on Sunday published a statement that said its negotiations with the owners of ships it charters “over adjusting the charter rates and postponing debt repayments to foreign creditors have made a significant progress.”
The statement also mentioned that Seaspan had agreed to adjust the charter rate in alternative ways and that global financial companies have expressed their consent to a proposal to delay loan repayments borrowed to Hanjin for vessel funds.
However, in an interview with Lloyd’s List, published Tuesday, Seaspan CEO Jerry Wang said, “Seaspan will never agree to charter rate renegotiations.” He told Lloyds List that Seaspan is willing to help in other ways, for example, investing in a revamped Hanjin Shipping should a new ownership structure take shape, or ordering ships on behalf of the South Korean line. Wang also said he wanted a merger between Hanjin and fellow liner carrier Hyundai Merchant Marine, also based out of South Korea, according to Lloyd’s List.
But Yonhap reported Financial Services Commission Chairman Yim Jong-yong, South Korea’s top financial regulator, “ruled out the possibility of a merger between Hanjin Shipping and Hyundai Merchant Marine Co.”
The website of the Singapore Supreme Court shows the ship Hanjin Rome on its list of vessels under sheriff’s arrest. The containership was arrested Monday night. Bloomberg also reported the arrest.
Ocean carrier schedule and capacity database BlueWater Reporting illustrates the Hanjin Rome has been operating on Hanjin’s FMX loop between Asia, the Indian Subcontinent and the Middle East. The loop deploys seven vessels with an average capacity of 8,113 TEUs. CMA CGM, “K” Line, UASC, KMTC, PIL and X-Press purchase slots on the loop, which has a rotation of Shanghai, Gwangyang, Busan, Ningbo, Xiamen, Shekou, Singapore, Port Kelang, Colombo, Dubai, Abu Dhabi, Bandar Abbas, Sohar, Singapore, Chiwan and Shanghai.
In a customer advisory from Chul Ho Kim, managing director of Hanjin Logistics in Ridgefield Park, NJ, the NVOCC said it is “closely monitoring the situation with Hanjin Shipping’s financial difficulties and imminent entry into court receivership due to failure to reach a resolution with their creditors by the set deadline.”
Hanjin Logistics separated from Hanjin Shipping in 2014 and is now part of Korea’s EUSU Holdings. The NVOCC said it “remains a separate financial entity and our financial standing is not compromised.
“Yet as an NVOCC utilizing Hanjin Shipping’s services along with hundreds of other shippers, we also recognize the serious risk that Hanjin Shipping entering into receivership means for those shipments booked on a Hanjin Shipping vessel, including possible asset seizures of vessels and containers by vessel owners and/or creditors.”
Mario Cordero, chairman of the U.S. Federal Maritime Commission, said Tuesday afternoon that the agency “is aware of reports that Hanjin Shipping may enter into receivership in the immediate future. We have not yet been notified by the company of any change in its financial status. If there are any developments related to this company and its solvency, the Commission will examine the situation to determine what, if any, action is to be taken.”
The chart below, built using data from BlueWater Reporting, Hanjin, and the other vessel owners mentioned below, shows a list of vessels Hanjin deploys on CKYHE operated services. The chart includes vessels Hanjin owns, along with vessels on charter. On these alliance services, Hanjin deploys 41 vessels across a total of six loops, the NE6, the HPH/MD3, the CAX, the AWE1, the AUE and the NUE. Twenty-two of these vessels are owned by Hanjin, while the remaining 19 vessels are on charter.
Hanjin’s creditors say no to more funding
