Hanjin Shipping expected to land 160 billion won in relief loans
Korea Development Bank (KDB), the shipper’s main creditor, is considering lending the company 50 billion won to help unload stranded cargo and will have specific details as early as this week, industry insiders say. And Korean Air, the air carrier arm of Hanjin Group and its major shareholder, confirmed late Wednesday that it will lend its group’s ailing shipping unit 60 billion won. The decision came after five rounds of board meetings.
Stocks of Hanjin Shipping rose nearly 30 percent on the news.
The board initially planned to put up Hanjin Shipping’s shares in the U.S. Long Beach Terminal as collateral for a loan, but it shifted its strategy to take the shipper’s accounts receivable worth roughly $208 million. The accounts receivable refers to the money Hanjin Shipping earned but has not received yet during its operations before it entered court receivership.
It took longer than expected for Korean Air to confirm funding for the shipping company as its board of directors feared they might be subject to breach of trust if they weren’t securing collateral. According to Korean law, management can be charged for breach of trust when the company incurs severe losses even if their decisions weren’t intentional or planned..
“Account receivables are relatively easier to liquidate and designate as collateral which also makes funding process quicker,” a spokesperson from Korean Air said. “Now the decision is in the court’s hands but considering the urgency of the situation we expect there will be progress soon.”
Holding Hanjin Shipping’s 54 percent stake in Long Beach Terminal as collateral has been a time-consuming process for the air carrier as it first needed to earn approval from six other financial institutions that already loaned the shipper money on security of the terminal and also from Swiss shipping company MSC, which controls the remaining 46 percent stake in the terminal.
Until now, the group’s shareholders and key executives, including Chairman Cho Yang-ho and Choi Eun-young, former chairwoman of the shipping company, have contributed 110 billion won in private funds.
However, analysts are not optimistic that the funding will be able to solve the bankruptcy and cargo crisis issues.
In fact, the shipping company’s debt is rising 2.4 billion won a day due to charter fees and gasoline charges across the world. Furthermore, it has an estimated 40 billion won debt to repay for charter fees, which were calculated as the company was going through court receivership.
The shipping company says it has 141 vessels under its flag, including 97 container ships. Of the total number of container ships, 60 are chartered and only 37 are owned by Hanjin, according to company data released this month.
The government has urged the shipping company’s leaders and main creditors to take actions to assist not only the troubled company but the entire shipping industry. Hanjin is the largest container operator by capacity in Korea and seventh largest in the world. However, officials changed their tone a bit Thursday, saying that the company is costing too much of people’s taxes.
“My heart is aching to see the No. 1 shipping company to go through such court receivership, but I think the bigger problem is that too much of tax is going into the company,” said Yoo Il-ho, Minister of Strategy and Finance. “I have heard the news that creditors might support additional 600 billion won to the company, but the money also is people’s tax and I think it is just too much.”
When asked whether the government should come up with special funds to save the shipping industry by lawmakers on Thursday, Yoo didn’t answer directly but said the government is discussing measures to solve the issue.
Yoo also said the shipping industry is crucial to national security and said the government will be prepared to have ships ready if a crisis occurs here in Korea.
Shares in Hanjin jumped 29.61 percent to 1,160 won in trading Thursday. Korean Air stock rose 5.43 percent to 33,950 won.
BY KIM JEE-HEE, KIM YOUNG-NAM [email@example.com]