If shareholders step in, FSC may support Hanjin

Financial Services Commission Chairman Yim Jong-yong said on Monday that the commission will review measures to conditionally support Hanjin Shipping, which now is under court receivership, at a press briefing.

“If major shareholders show actions [to support Hanjin Shipping], FSC and creditors will review necessary measures of support,” Yim said, stressing that major shareholders must share the burden of company restructuring.

The briefing was held as reports came in from all over the world of stranded Hanjin vessels and related damages to freight owners and supplier companies.

After Hanjin Shipping, once the nation’s No.1 and the world’s No.7 shipping company, filed for court receivership on Wednesday last week, 79 ships, including 61 container ships and 18 bulk ships were either seized or refused entry to or exit from foreign ports over 23 countries, as of 5 p.m. Monday, according to the Ministry of Oceans and Fisheries.

The damages due to the stranded ships are estimated to be around 16 trillion won ($14.5 billion) from over 8,300 freight owners.

The disturbance has also led to major ship owners including London-based Zodiac Maritime filing lawsuits. TradeWinds, a publication catering to the shipping industry, also reported that APM Terminals, a subsidiary of A.P. Moller-Maersk Group, filed suit against Hanjin Shipping in a Los Angeles court as the shipper has not paid for the loading and unloading of containers at terminals.

Zodiac is currently lending two 3,600 TEU (twenty-foot equivalent unit) container ships to Hanjin Shipping.

Deeper concerns from companies and the government involve the possibility that these stranded vessels may lead to an export crisis as big shopping seasons worldwide, including Thanksgiving Day, the United States’ Black Friday, which falls on the last Friday of November, and Christmas are approaching. The nation’s exports, which recorded a mild turnaround in August, may record another fall starting in September.

“It’s not that we haven’t considered the aftereffects to the shipping industry,” Yim said. “We were following basic principals of restructuring [regarding Hanjin].”

He added, “Safely delivering freight is Hanjin Shipping’s responsibility and as the shipper is still a subsidiary of Hanjin Group, then with this as a premise financial institutions and creditors will do our best to minimize damage incurred.”

Last Thursday, the government and Hyundai Merchant Marine (HMM), the other giant shipper in the country which, unlike Hanjin Shipping, successfully went through the restructuring process, decided to put 13 of HMM’s container ships on major Hanjin routes, including American and European routes, to cover losses. The actual coverage is expected to take effect on Sept. 8.

Government ministries gathered in an emergency meeting Sunday led by the Ministry of Oceans and Fisheries.

The top financial watchdogs, FSC and Financial Supervisory Service (FSS), also formed a special task force Monday to address the issue of supporting supplier companies related to Hanjin Shipping that are expected to suffer.

According to the FSC report, 457 suppliers were found to have debt to settle with the shipper, with 402 companies being small and midsized. To support these suppliers, the Korea Development Bank and Industrial Bank of Korea will extend the expiration dates of suppliers’ existing debts or guarantees while setting up an emergency fund for companies going through short-term liquidity crises.

Still, global ratings companies such as Fitch Ratings and Moody’s supported the decision of the Korean government and creditor banks, seeing the possible impacts to be positive.

“Fitch believes taking a more commercial approach towards financially ailing large corporates should ultimately bolster the health of the banking sector and lift Korea’s long-term growth prospects,” said Fitch in its report Monday.

“Had the banks accepted the restructuring plan,” Moody’s reported in its investor report, “their exposure to Hanjin would have increased without any guarantee that the plan would succeed and allow Hanjin to repay its debts.”

Amid this crisis, Hanjin Shipping shares closed at 1,070 won per share, falling 13.71 percent from the previous trading day in the Korean stock market on Monday. It was the first trading day after the company entered court receivership.

The most urgent task now facing the troubled shipper is paying back unpaid loading and unloading fees and port usage fees.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]