Minimize industrial repercussionsHanjin Shipping, South Korea’s household cargo carrier and the eighth largest in the world, is set for insolvency and court-led dismantlement. Creditors of the cash-strapped company decided against extending new funding and further life support to keep the shipper afloat. Creditors demanded the company come up with a reliable plan to raise at least 1 trillion won ($896 million) on its own to run the business smoothly until next year, but the management claimed 500 billion won was the best it could do.
Creditors decided to abandon ship, claiming it was like pouring money into a bottomless pit when the parent Hanjin Group does not have the will to save the company. Hanjin Group argues it did all it could, having already purchased 220 billion won worth of the shipper’s bonds. At the end of the day, both the group and lenders have decided that it was too risky to put more money into the company. There is still some time left before the Sunday deadline, when the support contract with creditors ends, but the odds of a reversal now are dismally low.
Pardon the metaphor, but when a sinking ship is this far underwater, the best move is to just let it go. Sustaining it would be messy and a waste of tax money, as we have seen in the case of Daewoo Shipbuilding and Marine Engineering. Court procedures and liquidation are necessary, if inevitable. But the side effects must be minimized. Hanjin runs a fleet of 99 container ships and 11 port terminals on 74 sea routes around the world.
Cargo transportation and trade could be hard hit if the shipper is placed under court receivership. The company would face a flood of penalties for noncompliance with freight schedules and contracts. The entire industry and national trade would be affected. Authorities must try to avoid the worst in the context of trade, rather than an individual company.
Financial Services Commission Chairman Yim Jong-yong repeatedly said restructuring needs to take place in consideration of the industry and not an individual company. This principle should also apply here. Hanjin Shipping’s court receivership is just one step. Under court administration, there are various options for liquidation, merging with Hyundai Merchant Marine and corporate sell-offs. The government and creditors should seek out the best solution to defend the shipping industry and our economy.
*JoongAng Ilbo, Aug. 31, Page 34
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