Accounting firm says Hanjin should liquidate

It’s the beginning of the end for Hanjin Shipping, once the world’s seventh-largest and nation’s top container line. An accounting firm recommended that the 39-year-old company liquidate its assets in a filing with Seoul’s bankruptcy court on Tuesday.

In a due diligence report submitted to the Seoul Central District Court, Samil PricewaterhouseCoopers estimated that “liquidating Hanjin is more economically viable than letting it continue business on a going concern basis,” meaning the company does not have enough resources to continue operating.

The firm concluded that Hanjin’s break-up value amounted to roughly 1.79 trillion won ($1.53 billion), while the going concern value was difficult to ascertain because it was unclear if the shipper could maintain its business.

The court in charge of Hanjin’s holdings recently sold key assets on its Asia-U.S. route to Korea Line Corporation, an affiliate of SM Group. Hanjin’s shares of the Long Beach Terminal in California have also been put up for sale and will likely go to a consortium comprising Switzerland-based Mediterranean Shipping Company and Hyundai Merchant Marine.

Thus, even if Hanjin were to continue its business, it would struggle without its core assets.

The court has decided to proceed with sales of Hanjin’s remaining assets rather than immediately terminate bankruptcy protection. As soon as sales are completed, the company will enter steps toward liquidation.

The fall of the nation’s largest shipping line suggests Korea’s shipping industry as a whole is in peril, even as the government and shipping company creditors continue to deny it.

According to a sobering report by global shipping intelligence firm Alphaliner, Korea’s container fleet capacity fell 59 percent from 1.06 million twenty-equivalent units before Hanjin’s court receivership in August to 510,000 TEU on Monday. Since the end of August, the country has been suffering from a massive logistics disturbance caused by the void left by Hanjin.

The government and creditors vowed to have Hyundai Merchant Marine fill Hanjin’s role and hoped it would even exceed the fallen shipper’s performance. But the designated successor has failed to live up to expectations.

First it lost Hanjin’s Asia-U.S. assets to Korea Line, and then it failed to gain full membership into a global shipping alliance led by Danish line Maersk. The government and creditors considered both plans crucial to ramping up Hyundai Merchant Marine’s business.

Korea’s core port, the Port of Busan, has also been seeing less cargo. According to data from the Busan Port Authority, the amount of transshipment cargo handled at the port in October fell 6.5 percent from last year. Transshipment refers to cargo unloaded from a ship and then transferred to another ship for further delivery.

One source in the industry said that if the trend continues, “business in the Port of Busan could be halved, creating a bigger crisis in the nation’s shipping industry.”

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