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| A miniature container is displayed at Hanjin Shipping's headquarters building in Yeouido, Seoul, Tuesday. Creditors held a meeting to discuss Hanjin Shipping's self-rescue plan and unanimously decided to stop supporting the nation's largest shipping line. It is expected to go into court receivership unless there are additional financing plans for Hanjin Shipping. / Yonhap |
Group required to shoulder greater burden for new loans
By Jhoo Dong-chan
The state-run Korea Development Bank (KDB) and other creditors of Hanjin Shipping agreed on Tuesday not to extend fresh loans to the debt-ridden shipper, pushing it to the brink of court receivership.
Officials from KDB and KEB Hana Bank said creditors unanimously decided to stop supporting the nation's largest shipping line at a meeting as the shipper's self-rescue program was not viable enough for the creditors to keep the company afloat.
"The submitted self-rescue plan was just not enough," KDB Chairman Lee Dong-geol said at a press conference. "Under the plan, creditors are required to finance more than 400 billion won ($357 million) to meet its debt payment deadline this year. It is unacceptable."
The shipper has outstanding loans of 1.3 trillion won that are set to mature next year. Of them, 650 billion won is required to aid the beleaguered shipping line immediately this year.
"It's like pouring water into a bottomless pit. Any new loans will be spent to cover its overdue debt owed to foreign creditors, rather than being used to boost its corporate value," Lee said.
He said the banks' ongoing debt restructuring program for the shipper will expire on Sept. 4.
Asked whether creditors could resume talks with Hanjin Group over steps to keep the company from going under court receivership, Lee said, "It's uncertain. Still, creditors will do their utmost."
The shipper's parent company Hanjin Group said in the plan, however, that it can offer only 200 billion won this year and another 200 billion won by next July through a capital increase by issuing new shares.
Promising to finance an additional 100 billion won by next July if needed, Hanjin Group asked creditors to finance the shortage of oncoming debt payments.
Creditors, however, rejected the offer. They are demanding Hanjin Group shoulder a greater burden in order for creditors to also take risks of extending more loans to the shipper.
"Of the total outstanding loans, Hanjin Group said it can only finance 30 to 50 percent of the shortage," another KDB official said. "The 1.3 trillion won debt could stretch to 1.7 trillion won in the worst case. Creditors decided not to take such risks."
Of the loans to the shipper, KDB, accounts for 660 billion won, KEB-Hana Bank 89 billion won, NH Nonghyup 85 billion won, Woori Bank 69 billion won, KB Bank 53 billion won, and other creditors the remainder, according to bank officials.
Following the creditors' decision, the Korea Stock Exchange issued a halt on the trading of Hanjin shipping shares at 1:30 p.m.
Analysts say if Hanjin Shipping goes into court receivership, it will most likely face liquidation. The shipping line with 99 containers, 11 terminals, 23 foreign corporate bodies and over 100 overseas business branches is expected to be put up for sale, a severe blow to the nation's shipping industry.
According to the Korea Shipowners' Association (KSA), the nation's economy is expected to suffer a total of 17 trillion won potentially for sales loss, shipping fare increase and decline in transit shipments if Hanjin Shipping goes bankrupt.
"Korea is an export-driven industry where shipping cost is essential in its competitiveness in the global market," said a KSA official. "It would cause huge damage on the nation's exports."
A Hanjin Shipping spokeswoman refused to comment on the creditors' decision.
