Hanjin Shipping to begin creditor-led debt restructuring

By Korea Herald

Published : May 4, 2016 - 21:57
Updated : May 5, 2016 - 09:14

Creditors of ailing Hanjin Shipping, the country’s largest shipper by capacity, have agreed to offer financial assistance to the company and initiate a corporate rehabilitation program with conditions attached.

Seven creditor banks, led by state-run Korea Development Bank, gave a nod to Hanjin Shipping’s proposal to restructure its debt and provide an aid package in return for self-rescue efforts, at a meeting Wednesday. 


The conditions for bailout include a cut in charter rates that Hanjin pays to foreign shipowners, retaining a global alliance membership and signing an agreement with bondholders for debt restructuring.

“This is a conditional debt restructuring agreement on the premise that stakeholders such as shipowners and bondholders would participate (in the restructuring process) and the company would maintain its alliance (with other shippers). If any condition is not upheld, the creditor-led debt restructuring will be terminated,” KDB said in a press release.

This comes days after Hanjing Shipping submitted a revised self-rescue measure to creditors on May 2 with more details such as negotiation plans with owners of its chartered fleet to lower lease rates, which costs about 1 trillion won ($865.8 million) per year.

The creditors plan to give a three-month maturity extension of principal and interest starting and roll out debt refinancing measures by hiring outside accounting firms, KDB said.

Hanjin had debt of 5.6 trillion won at the end of 2015, including 3.2 trillion won in ship-backed loans and 1.5 trillion won in bonds.

Including its smaller rival Hyundai Merchant Marine, global shipping companies have been struggling to make profit as overcapacity squeezed transportation rates amid slowing global trade.

Hyundai Merchant, which sits on 4.8 trillion won of debt, is already undergoing a creditor-led restructuring.

Hanjin Shipping formed a negotiation team to meet the creditors’ demand to persuade ship owners to cut leasing fees by 20 to 30 percent in three months.

“By end of May, the negotiations with 22 shipowners are expected to be finalized,” the company said in a press release.

It also plans to hold a meeting with bondholders on May 19 to extend the maturity date on 35.8 billion won of its bonds by four months.

Joining a new global alliance is critical for the container carrier to survive the slump as global operators are adding bigger ships and forming vessel-sharing alliances that reduce operating costs and give them more pricing leverage.

Hanjin Shipping is currently part of the CKYHE alliance but the other members confirmed their existing cooperation will continue until the end of March 2017. It means the Korean shipper has only few months to seek out a new alliance. 

By Park Han-na (hnpark@heraldcorp.com)

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The Korea Herald by Herald Corporation