(ATTN: UPDATES with comments by South Korea's top financial regulator)
SEOUL, Aug. 30 (Yonhap) -- Creditors of Hanjin Shipping Co. on Tuesday decided not to extend additional support to the cash-strapped shipper, creditor sources said, triggering speculation about its possible court receivership.
A creditor-led restructuring scheme for the largest South Korean shipper is set to end Sept. 4, which means the Hanjin Group will be left with little choice but to file for receivership before the deadline.
Hanjin Shipping headquarters in Seoul (Yonhap file photo)
The creditors, led by the state-run Korea Development Bank (KDB), have been ratcheting up pressure on the world's eighth-largest shipping line to roll out stronger self-rescue plans with a threat to put it under receivership.
But Hanjin Shipping's latest restructuring scheme centered on an infusion of 400 billion won (US$357 million) from its largest shareholder, Korean Air Lines, which fell short of the demands of creditors, which have asked for at least 600 billion won.
"We have reached the conclusion that we cannot accept (Hanjin)'s request for fresh funds, though both sides made efforts to narrow differences," Lee Dong-geol, head of the KDB, said in a news conference, citing a lack of responsibility of the company's biggest shareholder.
Korea Development Bank Chairman Lee Dong-geol announces Hanjin Shipping creditors' decision to cut financial support for the ailing shipper in a news conference in Seoul on Aug. 30, 2016. (Yonhap)
He also expressed the concern that the Korean creditors' possible infusion of
additional cash into the debt-ridden shipping firm would only be used to repay
its debts to overseas creditors, instead of being spent to improve its corporate
value. He described any fresh cash injections as "pouring water into a broken
Asked to comment on speculation by an association of local shippers that Hanjin's court receivership would incur a loss of 17 trillion won (for creditors), Lee said, "The estimate could be right or wrong, but the situation may not deteriorate to that level. We'll strive to minimize our losses."
Lee then ruled out a possible scenario of merging Hanjin Shipping into its smaller domestic rival Hyundai Merchant Marine. "At present, the merger is not on the table, though it can be an option in the future."
Touching on the concern that a liquidation of Hanjin would deter the competitiveness of the nation's shipping industry, the KDB head said, "(Creditors) will collect various opinions on the matter before coming up with the best package."
Hanjin Shipping has been striving to cut its chartered rates and extend the maturity of its debts in the face of its worsening financial health stemming from a continued fall in freight rates.
Officials of port logistics companies in Busan pose with a slogan "Let's save Hanjin Shipping" after asking the government and creditors for help in rehabilitating the shipper in a news conference in the southern port city on Aug. 30, 2016. (Yonhap)
The shipper said early this week that some foreign financial institutions had agreed to extend the maturity of its debts, which would ease its financial strain.
Also Tuesday, Financial Services Commission Chairman Yim Jong-yong, South Korea's top financial regulator, said the government has measures in mind to maintain the competitiveness of the country's shipping industry even if Hanjin Shipping is placed under court receivership.
Yim ruled out the possibility of a merger between Hanjin Shipping and Hyundai Merchant Marine Co.
Hanjin said in a statement, "We will do our utmost to put our business back
on track even if we come under a court-led debt-rescheduling program."
Meanwhile, local banks' credit exposure to the cash-strapped Hanjin Shipping is estimated at 1.02 trillion won, but they have already set aside sufficient provisions against the loans.
The KDB, KEB-Hana Bank and other banks extended a total of 1.02 trillion won to the country's No. 1 shipper.
The main creditor, KDB, has a credit exposure of 660 billion won, followed by KEB-Hana Bank with 89 billion won, NH Nonghyup with 85 billion won, Woori Bank with 69 billion won, KB Bank with 53 billion won and the Korea Export-Import Bank with 50 billion won, the sources said.
The outstanding amount of bonds sold by Hanjin Shipping reached 1.2 trillion won as of end-June. Bondholders, mostly institutional investors, will face a huge loss if the shipper is put under receivership, industry watchers said.
But about half of the bonds are held by the Korea Credit Guarantee Fund, a state-run credit guarantee agency.
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