South Korea says tough luck to Hanjin as shipping line sinks

Hanjin Logistics

13/09/2016 08:24

By Christine Kim and Cynthia Kim 
    SEOUL, Sept 13 (Reuters) - The South Korean government, long 
a bastion of support for the country's big conglomerates, is 
sticking to its hard-line stance on Hanjin Shipping Co Ltd 
 117930.KS , whose collapse is roiling global supply chains. 
    Since the world's seventh-largest container carrier filed 
for court receivership in late August, the government has sought 
to limit the impact on the export-dependent economy and Hanjin 
customers but is otherwise leaving the company to fend for 
itself. 
    "It now is entirely up to the court," a government official 
closely linked to the matter told Reuters, declining to be named 
due to the sensitivity of the issue. 
    South Korea has said no government or central bank money 
will be directly injected into firms undergoing restructuring in 
the ailing shipping and shipbuilding industries. 
    Instead, it has extended aid to small-to-medium sized 
businesses jolted by the restructuring process, dishing out 
cheap loans and providing funds to maintain shipbuilding jobs 
and retrain workers in hard-hit regions of the country. 
    The government has also taken measures such arranging for 
rival shipper Hyundai Merchant Marine  011200.KS  and smaller 
carriers to deploy ships to routes that were served by Hanjin. 
     In recent months, Korea Development Bank discussed 
arranging a merger between Hyundai Merchant Marine (HMM), itself 
under creditor-led debt restructuring. That effort ended when 
Hanjin sought court receivership after lead creditor Korea 
Development Bank halted support, Hanjin Shipping executive Kim 
Hyun-seok said last week. 
    KDB, which is also HMM's lead creditor, would be willing to 
back HMM's acquisition of Hanjin assets if it makes business 
sense and depending on the outcome of the receivership process, 
a KDB official told Reuters. 
    "Although we are considering ways to absorb Hanjin 
Shipping's market share, HMM is currently primarily focused on 
supporting cargo owners to minimize their difficulties," a 
spokeswoman for HMM said. 
    
    POLITICALLY PALATABLE 
    The tougher government line with Hanjin marks a departure. 
    Last year, KDB and the Export-Import Bank of Korea (Kexim) 
pledged 4.2 trillion won ($3.8 billion) in loans and equity to 
Daewoo Shipbuilding & Marine Engineering Co Ltd  042660.KS , the 
world's largest shipbuilder.  
    That drew criticism after Daewoo Shipbuilding, which 
received a bailout some 15 years ago, shocked investors with a 
first-half operating loss of about 3 trillion won. 
    Kong Dong-rak, general manager at Korea Asset Investment 
Securities, said the government's decision was based on the cost 
of reviving Hanjin, given the high charter fees Hanjin is paying 
to shipowners and the industry's bleak near-term prospects. 
    Hanjin had debt of 6.1 trillion won at the end of June. 
    "The government decided it was time to cut them off because 
they knew they were sinking," Kong said. 
    Playing hardball with Hanjin, with just 1,428 employees in 
South Korea, is easier to do politically than with Daewoo 
Shipbuilding, which employs 38,000. 
    "Lazy thinking that the government will have no choice but 
to help shippers if they run into problems has ended up hurting 
trading companies," President Park Geun-hye said at a cabinet 
meeting on Tuesday. 
    "We will not sit silently by as corporate managements who do 
not aggressively try to recover their businesses and wait for 
the government to solve everything," she said. 
    A Hanjin Shipping spokeswoman declined comment.  
    Financial regulators blamed the carrier for a lack of 
information. 
    "We tried to set up countermeasures for logistics issues 
which will arise from Hanjin Shipping's court receivership, but 
we were unavoidably limited as Hanjin Shipping did not respond 
to any requests from creditors for information about cargo 
owners and sailing plans," FSC chairman Yim Jong-yong told a 
parliament hearing last week. 
    South Korea's trade ministry has been helping cargo owners 
and exporters, but not Hanjin itself, an official there said. 
    "All additional help that goes to Hanjin should be limited 
to supporting the offloading of cargoes. No more," said an 
official directly involved in discussions with creditors. 
    ($1 = 1,115.3000 won) 
 
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Graphic on Hanjin Shipping    http://tmsnrt.rs/2cq2WWj 
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 (Additional reporting by Joyce Lee and Jane Chung; Editing by 
Tony Munroe and Lincoln Feast) 
 ((christine.kim@thomsonreuters.com; 822 3704 5665; Reuters 
Messaging: christine.kim.thomsonreuters.com@reuters.net)) 
 
Keywords: HANJIN SHIPPING DEBT/SOUTHKOREA