Smaller operators like Hanjin, which with 618,133 TEUs, or Twenty-foot Equivalent Units, of container capacity is in the lower tier of the top 10 shippers, can not muster the scale needed to get by.
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Hanjin last week filed for receivership after attempts to raise fresh funding for the indebted firm failed.
Shares of South Korea’s largest shipping company, Hanjin Shipping, have suffered a sharp drop at the Seoul Stock Exchange due to the delicate situation of the company, whose vessels have lost access to worldwide ports after the company declared suspension of payments.
Hanjin vessels are now carrying cargo worth 16 trillion won (RM59 billion) belonging to some 8,300 cargo owners, the Korea International Trade Association said, adding that the carrier has unpaid bills amounting to 610 billion won.
As of Sunday morning, 68 Hanjin vessels were stranded out at sea or at port in 23 countries, including one ship arrested in Singapore, according to the company.
Ratings agency Fitch said in a research note that Hanjin Shipping risks should be manageable for South Korea’s banks.
Hanjin is the worlds seventh-largest container shipper and the news left cargo headed to and from Asia in limbo.
Hanjin vessels were carrying cargo worth 16 trillion won belonging to some 8,300 cargo owners, the Korea International Trade Association said on Monday.
However, the government remains adamant that Hanjin’s problems were its owner’s responsibility in the first place. “Korea Air made a drastic decision despite its debt-to-equity ratio of over 1,000%”.
The Hanjin group suffered a severe blow to its reputation in 2014 when Cho Hyun-ah, Cho Yang-ho’s daughter and a vice president of Korean Air, threw a tantrum over how macadamia nuts were served to her on a flight and ordered the plane she was on to return to the gate at John F. Kennedy Airport in NY.
During this process, the Hanjin Group was hardly hit.
Hanjin is now struggling under a debt estimated at six trillion won ($5.37 billion), after posting huge losses over the past several years. The ratio sat at 867% last year but soared to 1,100% in the second quarter of this year. According to local media reports, that amounts to 600 billion won ($543 million). “Someone from the garment industry called earlier today asking: “How long is this going to go on, because I’ve got clothing out there”, Louttit said.
Hanjin is the largest shipping company ever to file for bankruptcy.
A growing burden from financial support for Hanjin Shipping sent down Korean Air’s credit rating to BBB+ at the end of March.
The court indicated that it could study the option of saving the company if there is will from creditors.
Some people in the Korean business world analyze that the Hanjin Group’s display of its maximum sincerity expanded a possibility that Hanjin Shipping will pull through. While some retailers may already have merchandise for the holiday season affected, experts say what’s most important is that the issue be resolved before the critical shipping month of October.
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The shipping company’s shares rose more than 20% on the news of a lifeline.
