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Hanjin's Insolvency Leaves Few Options

Posted by Andrew Beso | September 2, 2016

Hanjin Shipping’s financial limbo has taken a turn for the worst as its creditors have ruled out any further funding.

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The only thing left to do for South Korea’s largest container carrier was to seek for court receivership on Thursday, just a day after it filed for bankruptcy. The recent development suggests that Hanjin is trying its best to get back to its feet, but in the absence of financial security—is the world on board?

Uncertainties Ahead

Currently, the company’s assets are frozen for a deliberation period. Seoul Central District Court is determining whether to dissolve Hanjin Shipping—a process that usually takes one or two months—but Hanjin’s case may need to be hastened. As of Friday, September 2, 45 of its ships remain adrift at different ports in China, Japan, Singapore, and India, and other countries—they’ve been denied access by operators who fear that the company might be unable to pay docking fees. Risk-aversion was the natural response after analysts and industry officials noted that an eventual liquidation of the company, which has debt of approximately US $5B, is likely. It was that same reason that its membership for the alliance between Cosco, “K” Line, Yang Ming Line, and Evergreen Line—CKYE Alliance—has been suspended. Just recently, Evergreen Line adopted measures to halt any of its operational involvement with Hanjin Shipping.

 

"There is a loss of faith among customers. It's very unlikely Hanjin can come back from the ashes."

-Rahul Kapoor, Director at Maritime Consultancy Drewry Financial Research Services

Global Disruption

The world’s seventh-largest container line is no longer accommodating any customers, and its existing clients are scrambling to divert their freight to other carriers. Shipping analyst Alan Murphy warned that disruptions in global sea freighters’ supply chain will not just be contained within Hanjin’s scope, but will eventually impact those under the CKYHE alliance. He even warned that the “considerable disruption” may extend to those vessels sharing agreements in non-alliance trades.

Response

Meanwhile, to cushion the impact, the South Korean government is reaching out to overseas carriers for assistance. And later this month, the country’s oceans ministry is expected to announce cargo-handling measures, which could include Hyundai Merchant Marine, to ease out a forecasted two to three month delay in the shipping of Korean goods. In fact, the rival company has already sent out 13 of its ships to two Hanjin-exclusive shipping routes.


South Korea’s Financial Services Commission disclosed that it’s promoting the sale of Hanjin Shipping’s core assets to Hyundai Merchant Marine. According to reports, the rival is looking at taking over Hanjin Shipping’s port terminals and global business networks as the assets are still deemed healthy.


The financial turmoil has stripped Hanjin Shipping of its bargaining chips. It has lost the confidence of its customers, investors, and alliances—and it has close to nothing in financial leverage. Bowing down to its last resort, the company sets the tone for the negotiation: all in.

 

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