Bankruptcy looms over Hanjin Shipping as creditors halt funding

Cash-strapped Hanjin Shipping will see its creditor-led restructuring scheme end on 4 September, and without extension of funds from its creditors, the Korean shipowner will have to file for court receivership.

Back in May this year, the creditors approved Hanjin Shipping’s voluntary restructuring, which is an uphill task considering the massive debt of approximately KRW5.6trn ($5bn).

The creditors, led by state-owned Korea Development Bank (KDB), have kept up their pressure on Hanjin Shipping to implement austerity measures to stabilise its weak financial position.

The shipowner’s restructuring program has thus far relied on an infusion of KRW400bn from its largest shareholder Korean Air Lines, falling short of at least KRW600bn that the creditors have wished to see.

Earlier this month, South Korea’s Financial Services Commission (FSC) affirmed that the government has no plan to pump money into the ailing Hanjin Shipping, as the shipowner is expected to resolve its own crisis or face court receivership.

Hanjin Shipping has been negotiating with other owners for a reduction in containership charter rates, and talking with many financial institutions over ship mortgage loans.

In the first half ended 30 June 2016, Hanjin Shipping booked a loss of KRW473.1bn, widening from the deficit of KRW127.2bn in the same period of last year.

The ominous fate of Hanjin Shipping resulted in its shares being suspended from trading after plunging 29% on Tuesday to the lowest price since December 2009. The company’s share price has plummeted 66% so far this year.

Hanjin Shipping is supposed to join a new container shipping partnership named THE Alliance starting April 2017, subject to approvals by the relevant regulatory authorities. The six-member THE Alliance is currently made up of Hapag-Lloyd, K Line, Mitsui OSK Lines (MOL), Nippon Yusen Kaisha (NYK), Yang Ming and Hanjin Shipping.