Creditors get tough on Hanjin Chairman ChoCreditors of troubled Hanjin Shipping continue to demand more of Hanjin Group and its chairman, Cho Yang-ho, warning that unless an additional 1 trillion won ($850 million) in cash is coughed up, they will file for court receivership.
But Cho has already spent more than 2 trillion won trying to keep the shipping company from going bankrupt and may not be able to offer more. In April, when he gave up management rights and supported a self-rescue plan, he warned that no more personal help would be forthcoming.
The latest proposal by creditor banks was that Korean Air, Hanjin Group’s airline and the largest shareholder of Hanjin Shipping, issue new shares to recapitalize the shipper.
Creditors also want Chairman Cho to chip in his own money.
The creditors proposed granting Hanjin Group a pre-emptive right to buy back the new shares before they are offered to the public once the shipper’s condition is stabilized.
A similar situation occurred when Kumho Asiana Group Chairman Park Sam-koo regained control of Kumho Industrial after injecting 220 billion won of his own money for a debt workout program.
Hanjin Shipping currently owes 100 billion won in unpaid charter fees to shipowners and is cash squeezed. According to creditors, the company will need some 1.2 trillion won in cash to operate for the next two years.
Hanjin Group suggested that it raise 400 billion won while also requesting 600 billion won in support from the shipping company’s main creditor, Korea Development Bank (KDB), but the creditors rejected the offer.
“There will be no additional support from creditors, as was agreed with the financial regulator earlier this year,” a KDB spokesperson said Monday.
KDB has said the company must take care of its liquidity problems on its own at a joint ministers’ meeting for industrial restructuring held last Wednesday.
“Hyundai [recently] sold Hyundai Securities, which provided [over] 1 trillion won [for Hyundai Merchant Marine],” the spokesman said. “Such active efforts are required [for Hanjin] to turn the company around.”
Hyundai Group Chairwoman Hyun Jeong-eun’s personal contribution of around 300 billion won to help Hyundai Merchant Marine is another precedent that creditors remind Hanjin’s Cho about.
Hanjin Group maintains that it has already spent a lot on the shipping company over the last two years.
Korean Air, which has a 33.2 percent stake in Hanjin Shipping, poured in over a trillion won after Cho became chairman of the shipper in 2014. That funding elevated the airline’s debt-to-equity ratio to a risky 931 percent, based on first-quarter results.
As the shipper failed to show improvement and additional injections were expected, the credit rating of the airline by the Korea Investors Service dropped from A in 2013 to BBB+ in March this year.
“Honestly, the decision of whether Cho will make a personal contributions is his own to make, and we have no authority to talk about it,” a Hanjin Group spokesperson said Monday.
“Nothing regarding additional funding by Korean Air has yet been confirmed.”
Meanwhile, Korea’s shipbuilders are having trouble with the restructuring plans proposed last week, as their unions are not going along.
The union of Daewoo Shipbuilding & Marine Engineering (DSME) opened a vote by its 7,000 union members on a strike. The trigger was the shipbuilder’s plan to spin off its special-purpose ship division, which makes ships for defense, to bring in an additional 300 billion won.
“We are an ownerless company, and our defense business was what hindered foreign buyers from acquiring DSME,” a union spokesperson said. “The separation of the special-purpose ship business essentially means the creditor bank, KDB, plans to sell DSME in the near future.” The company denied the claim and said the decision was financial.
The union of Hyundai Heavy Industries (HHI) is planning a protest Wednesday at its Ulsan shipyard over the company’s recent decision to spin off 994 facility maintenance workers into a separate company.
“We joined HHI, but the company is pushing us to become suppliers now,” a union member said. “Management says our wages will be guaranteed, but once we move out, we’re not part of HHI anymore.”
BY KIM JEE-HEE, PARK EUN-JEE [email@example.com]