Hanjin Shipping Opts for Debt Restructuring

 

The board of Hanjin Shipping decided to file for receivership and give creditors authority to manage the company, bowing to calls from the government and its main creditor Korea Development Bank (KDB) which asked Cho to accept heavy restructuring of the company.

 

"Board directors of Hanjin Shipping decided to give up their management control for debt restructuring," said a KDB spokesman.

 

Having been faced with an outstanding debt of USD 406 million due in the first half of this year, the company is now aiming to improve the financial structure and “normalize” its management.

 

Hanjin Shipping and its big brother company Korean Air announced on April 22 that they held the board of directors meeting each and made a decision to give up the management control over the shipping arm of the Hanjin Group and apply for the creditor receivership in a bid to improve the financial structure of the shipper and normalize its management.  

 

Hanjin, whose chairman Cho Yang-ho also controls flag carrier Korean Air, had debt of 5.6 trillion won ($4.9 billion) and a debt-to-equity ratio of nearly 850 percent as at the end of 2015, according to the company.

 

The government's drive for restructuring was epitomized by President Park Geun-hye's warning Friday that companies avoiding "surgery" out of fear could face "death".  

 

Hanjin Shipping is the latest among the nation’s liners recasting their debt after Finance Minister Yoo Il Ho said the industry needs to be overhauled following years of weak demand that eroded cash at companies.

 

The current shipping alliance that Hanjin is part of, called CKYHE, expires at end-2016 and has seen two high-volume members commit to a new partnership earlier this week.

 

Hanjin and South Korea’s other big shipping line, Hyundai Merchant Marine Co. Ltd., have been struggling under heavy debt loads in a troubled global shipping market awash in excess capacity and plummeting prices.