Hanjin submits revised plan to creditors

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Hanjin submits revised plan to creditors

Hanjin Shipping submitted a revised turnaround plan to its main creditor Korea Development Bank (KDB) on Thursday to meet requests from its creditors to secure more liquidity.

The exact amount of cash that the shipping company has proposed to rake in was not disclosed by the company or creditor banks, but the amount is speculated to be in the 500 billion won ($448 million) range, slightly more than the original plan submitted by Hanjin Shipping but less than what KDB has been requesting.

“An official creditor meeting is scheduled for Friday afternoon, and details of the submitted plan will be disclosed then,” a KDB source said after the plan was submitted.

Creditor banks including KDB, KEB Hana Bank and KB Kookmin Bank will share details of Hanjin Shipping’s plan today before they vote on whether to extend the deadline for the company to fulfill turnaround conditions.

The voting could take place as soon as today or sometime next week.

The creditors will focus on whether the company is capable of securing the cash it needs to continue business. Hanjin Shipping has until Sept. 4 to prove that to creditors, and as the deadline looms, creditors hold the key to deciding if the company should fall under court receivership.

KDB has been demanding the company come up with ways to secure at least 700 billion won, under assessments that the company is more than 1 trillion won short in holdings to keep liquidity until next year.

Hanjin Shipping, on the other hand, has maintained that the maximum amount they can secure is 400 billion won.

According to audits by Samil PricewaterhouseCoopers, Hanjin Shipping needs about 3 trillion won until next year. If the company can delay 70 percent of the debt from shipping finances, which is due to expire this year, and manage to cut charter fees, then the amount of money it needs to raise can be halved.

And even under these conditions, considering the company has already submitted a turnaround plan to secure 411.2 billion won, an extra 1 trillion won would still be needed to keep the company going.

Creditors have long been comparing Hanjin Shipping’s case with Hyundai Merchant Marine (HMM), the other major Korean shipping company. While both companies were under similar demands from their creditors, HMM managed to pull out of its situation quicker after the owner families of parent company Hyundai Group injected private cash worth roughly 30 billion won.

HMM also sold core affiliated companies like Hyundai Securities to bring in more money.

In the process, Hyundai Group stepped down from being a conglomerate to a medium-size company according to set industry standards. However, Hanjin Group has shown no similar signs during its shipping arm’s restructuring process, citing financial difficulties in the group itself.

Multiple Korean media sources are pointing to a capital increase through an issuance of new stocks by Hanjin Group’s airline Korean Air and private funding from Hanjin Group Chairman Cho Yang-ho as the most probable options the shipping company will take to raise money.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]
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