Hanjin Shipping gets more relief to resolve crisis

Hanjin Shipping may be able to secure 160 billion won ($143 million) in funding, just 10 billion won short the amount that government officials say is needed to resolve its global cargo crisis.

Korea Development Bank (KDB), the shipper’s main creditor, is considering lending the company 50 billion won to help unload stranded cargo, 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.

Shares in Hanjin jumped 29.61 percent to 1,160 won 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 strategy to take the shipper’s accounts receivable worth about $208 million. The accounts receivable is the money Hanjin Shipping earned but has not yet received 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 were not 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 the 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 as the air carrier first needed to earn approval from six financial institutions that already loaned the shipper money on security of the terminal and also from Swiss shipping company MSC, which has a 46-percent stake in the terminal.

Until now, the group’s shareholders and key executives, including chairman Cho Yang-ho and former chairwoman Choi Eun-young, have given 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. The shipping company’s debt is rising 2.4 billion won a day due to charter fees and gasoline charges. It has an estimated 40 billion won debt to repay for charter fees.

Hanjin says it has 141 vessels under its flag, including 97 container ships. Of the number of container ships, only 37 are owned by Hanjin, according to data released this month.

The government has urged the shipping company’s leaders and main creditors 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 too costly to taxpayers.

“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 taxes are going into the company,” said Yoo Il-ho, Minister of Strategy and Finance. “I have heard the news that creditors might support an additional 600 billion won to the company, but the money is also people’s taxes and I think it is just too much.”

When asked if the government should allocate special funds for the shipping industry, Yoo only said the government is discussing it. He also said the industry is crucial to national security and said ships will be ready if a crisis occurs in Korea.

BY KIM JEE-HEE, KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]