Hanjin Shipping files for bankruptcy as ports deny access to vessels
Photo caption: Suk Tai-soo, president and chief executive officer of Hanjin Shipping Co, arrives at a court in Seoul, South Korea, August 31, 2016. Photo Credit: REUTERS
September 1, 2016: South Korea's Hanjin Shipping filed for court receivership on Wednesday after losing the support of its banks, making way for its assets to be frozen as ports from China to Spain denied access to its vessels.
Banks led by state-run Korea Development Bank (KDB) backed out support for the world's seventh-largest container carrier on Tuesday, saying a funding plan by its parent group was inadequate to tackle debt that stood at 5.6 trillion won ($5 billion) at the end of 2015.
Hanjin Shipping, South Korea's biggest shipping firm, announced the filing for receivership and a request to the court to freeze its assets, which the Seoul Central District Court planned to grant, a judge told news agency Reuters, declining to be named.
The court will now decide whether Hanjin Shipping should remain as a going concern or be dissolved, a process that usually takes one or two months but is expected to be accelerated in Hanjin's case, the judge said.
A bankruptcy for Hanjin Shipping would be the largest ever for a container shipper in terms of capacity, according to consultancy Alphaliner, exceeding the 1986 collapse of United States Lines.
Global shipping firms have been swamped by overcapacity and sluggish demand, with Hanjin booking a net loss of 473 billion won in the first half of the year.
South Korea's ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring. The KDB's decision to stop backing Hanjin Shipping shows the government is taking a tougher stance with troubled corporate groups.
"The government will swiftly push forth corporate restructuring following the rule that companies must figure out how to survive and find competitiveness on their own while taking responsibility," Finance Minister Yoo Il-ho said.
Hyundai Merchant Marine, the country's second-largest shipping line, will look to acquire its rival's healthy assets, including profit-making vessels, overseas business networks and key personnel, South Korea's Financial Services Commission said.
A Hyundai Merchant Marine spokesman told Reuters nothing had been decided about the potential acquisition of Hanjin assets and that the firm will hold talks with KDB. Hyundai Merchant Marine is also in the process of a voluntary debt restructuring.
South Korea's oceans ministry estimates a two- to three-month delay in the shipping of some Korean goods that were to be transported by Hanjin Shipping, and plans to announce in September cargo-handling measures which could include Hyundai Merchant Marine taking over some routes, a ministry spokesman said on Wednesday.