The creditors of Hanjin Shipping on Tuesday decided not to extend their financial support to the cash-strapped shipping line, raising the prospect of Korea’s top shipper filing for court receivership.

The creditors led by the Korea Development Bank reached a unilateral agreement to reject a 500 billion won ($447 million) self-rescue plan submitted by Hanjin last week, calling it insufficient. 


With the decision, the creditors-led debt restructuring scheme, initiated in May, will end as planned on Sept. 4, leaving the company to either survive on its own or file for court receivership.

“Hanjin’s final proposal fails to cover the total amount of cash shortfalls,” said Lee Dong-geol, chairman of KDB at a press conference held at the bank headquarters in Yeouido, Seoul. “Creditors judged the company’s will for normalization is weak and the fund amount is significantly insufficient.”

Hanjin Group, in the plan submitted Thursday, said it would secure a total of 500 billion won -- 400 billion won from Korean Air and 100 billion won from other affiliates and Hanjin Group Charman Cho Yang-ho’s private account.

The creditors expressed disappointment in this, saying the amount is nearly the same as suggested in a previous plan. They wanted the group to inject in the area of 1 trillion won to 1.3 trillion won, claiming Hanjin is in immediate need of about 600 billion won to repay debt.

If the creditors continue supporting the ailing shipper, new funds would run out soon as the company is pressured by overseas shipowners to pay charter fees.

“If we decided to extend financial aid, the money is unlikely to be used for the company’s rehab, but is highly likely to go to the company’s overseas debtors, ending up with domestic financial institutions repaying the overseas debt on behalf of the company,” Lee said.

If Hanjing Shipping is sent to court, some speculate the company could face bankruptcy as foreign owners of the chartered fleet will want to take their ships back while clients may cancel their shipping contracts with Hanjin.

The Korea Shipowners’ Association projected that about 17 trillion won of direct and indirect damage would hit the shipping business if the company goes bankrupt.

“If Hanjin goes under court receivership, there may be various kinds of seizures, but I believe Hanjin can deal with it in a good manner,” the KDB chairman said. “We will also help minimize possible losses at least until Sept. 4.”

Adding further aid to salvage the shipper is not being considered at the moment, he said.

“There will be no penny from taxpayers’ money going into the company,” Lee said.

A possible merger with Hyundai Merchant Marine could be one of many measures after the process, Lee said, but the discussion would take time.

As for the possibilities of bankruptcy, a KDB official said it depends on cooperation from overseas stakeholders of the company.

“After the court receivership, it seems highly likely that the company goes bankrupt,” he said. “But among the many unknown bondholders and stakeholders outside the country, (someone) might give help to prevent the scenario. (The company’s fate) would be dependent on their cooperation.”

By Song Su-hyun (song@heraldcorp.com)