South Korea’s biggest container shipping line, made a decision to apply for court receivership after lenders halted all support.
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Amid growing possibility of South Korea’s Hanjin Shipping Co. heading for court receivership after creditor banks rejected the injection of fresh funds to salvage the troubled shipper, the company’s corporate bonds worth about 1.1 trillion won ($982.3 million) are expected to turn into worthless scraps of paper.
The Yonhap news agency says that the South Korean government will prod Hyundai Merchant Marine Co. into acquiring some of Hanjin Shipping’s assets, a move that Yonhap says as seen as a prelude to a de-facto merger of the two.
The FSC also said Hanjin Shipping’s receivership filing would have a limited impact on domestic financial markets.
Shares of Hanjin Shipping stopped being traded on Tuesday after plunging as much as 26 percent upon the news.
A day after lenders pulled their support for Hanjin Shipping the company said it would file for receivership.
Yang Chang-ho, a professor at Incheon National University, predicted that once shipping operations halt, Hanjin will be in a very hard situation to make a return, even if the court decides on corporate rehab.
South Korea’s shipbuilders and shipping firms, which underpinned decades of economic growth, are reeling under debt after racking up losses amid a downturn caused by overcapacity and sluggish trade, forcing state banks to pick winners. Hanjin Shipping submits another version on Friday.
Hanjin Shipping said Monday that it could generate about 1.27 trillion won in additional liquidity, partly by extending maturities of some debt and charter rate adjustments.
“Hanjin’s plans are inadequate given the total amount of funds needed, and considering the proposed timing of Hanjin’s infusion of funds, they lack conviction to normalize the company”, Korea Development Bank Chairman Lee Dong-geol told a press conference.
“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.
Hanjin’s fleet totals 132 container ships and bulk carriers, of which it owns 59.
South Korea’s financial authorities on Wednesday assured the market that they will take timely measures against potential fallout from the crisis surrounding the nation’s largest shipping line.
China past year merged China Ocean Shipping Group and China Shipping Group to form China Cosco Shipping Corp.as part of the government’s efforts to shrink industries beset by overcapacity while creating globally competitive businesses.
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Besides, the Hanjin fiasco is feared to deal a blow to the country’s shipping industry.
