Korea’s Hanjin Shipping becomes symbol of industry in pain

The firm may still need as much as 1.3 trillion won ($1.2 billion) in cash to roll over debt in the wake of losses in four of the last five years, main creditor Korea Development Bank said on Tuesday. And going into receivership, under which a court will decide the firm’s fate, will add to the headache.

The creditors said that they will be able to support Hanjin Shipping’s normalization only if the ailing shipping company additionally prepares at least 600 billion won (US$521 million).

The bank already owns a majority of the shares in competitor Hyundai Merchant Marine (HMM) after HMM converted debt into shares earlier this year as part of a rescue plan for the crisis-stricken company. An unnamed official from KEB Hana Bank said that it plans to pile up all of the necessary funds to deal Hanjin Shipping debt in the third quarter.

“Hanjin’s plans are inadequate given the total amount of funds needed, and considering the proposed timing of Hanjin’s infusion of funds, they lack conviction to normalize the company”, Korea Development Bank Chairman Lee Dong-geol told a press conference. The company charters 61 vessels from various global owners including Seaspan, Danaos, Conti Reederei, Ciner, KMarin, Rickmers and Pacific worldwide Lines, Alphaliner said. “The firm is highly likely to be kicked out of the global shipping alliance as well”, an industry insider said.

The South Korean company has succumbed to a crippling combination of lackluster global trade, a glut of container ships and brutal competition from rivals.

The court will soon determine whether Hanjin 117930, -24.16%, the country’s largest container operator by capacity, should be liquidated or given a chance to survive after restructuring, the company said. Hanjin’s paralysis could send local and foreign shippers elsewhere Another possibility is that the operation of Hanjin Shipping’s vessels could be paralyzed.

“With Hanjin Shipping filing for court receivership, there is a worrying view that Korea’s shipping industry as a whole may lose its global competitiveness”, he said.

Shipping industry economics have deteriorated.

The board of South Korea’s largest container-shipping company on Wednesday voted to file for court receivership after lenders rejected a restructuring proposal saying it was insufficient to tide over a cash shortage.

Yonhap reports Jeong Eun-bo, vice chairman of the Financial Services Commission (FSC), as described the idea as meant to stop the country’s shipping industry from losing competitiveness.

Some overseas ports have already impounded Hanjin’s vessels on August 31, on concerns that the operators would not be able to receive payments.