1st September 2016
Hanjin file for receivership
South Korea’s Hanjin Shipping Co filed for receivership Wednesday, as shipping companies world-wide grapple with overcapacity amid a slump in global trade.
The filing with the Seoul Central District Court came just a day after the company’s creditors discontinued providing a lifeline after financial assistance of more than 1 trillion won ($896 million) failed to keep it afloat.
The court will soon determine whether Hanjin, the country’s largest container operator by capacity, should be liquidated or given a chance to survive after restructuring, the company said.
Hanjin’s receivership, which is a form of creditor protection, comes as shipping companies world-wide have been hit by years of slumping demand—particularly from China—as global trade has slowed. Some companies have been forced to sell vessels at a discount while a handful of smaller operators have gone bankrupt.
Hanjin, the world’s seventh-largest shipping line by capacity, would become the biggest company in the industry to go under if it is ordered to fold.
State-run Korea Development Bank, the company’s main creditor, on Tuesday withdrew its support, saying a funding plan by Hanjin’s parent group wasn’t sufficient to tackle the shipper’s debt, which stood at $5.5 billion at the end of June.
Hanjin—a unit of the conglomerate that controls Korean Air Lines Co. —has faced an acute credit crunch after posting a loss each year from 2011 to 2014, as slowing global trade and overcapacity depressed freight rates. It has been under a creditor-led debt restructuring program since May.
The Korean government said it wants Hanjin’s domestic rival, Hyundai Merchant Marine Co. , to buy healthy assets from the troubled company. It rejected the idea of a merger.
A Hyundai Merchant spokesman said the company would discuss the matter with the government and Korea Development Bank. The state-run bank is also Hyundai Merchant’s main creditor. Hyundai Merchant, the country’s second-largest shipping company, is on a recovery track under a creditor-led debt restructuring program.
Government officials said Hanjin’s receivership could also lead to the company’s exclusion from a global shipping alliance, reducing its chances of survival.
Hanjin is part of The Alliance, a six-member group that was formed in May to rival the dominance of global giants Maersk Line and Mediterranean Shipping Co. Hanjin said its relations with the alliance would end if the company ended up in bankruptcy.
Wednesday’s filing, however, is already having an impact on Hanjin’s operations.
Ports—including those in Shanghai and Xiamen in China, Valencia, Spain, and Savannah, Ga.—had blocked access to Hanjin ships due to concerns that they wouldn’t be able to pay fees, according to a Hanjin spokeswoman.