Beleaguered Hanjin Shipping Co., South Korea’s leading container shipper currently under receivership, said September 2 that 45 of its ships, including 41 container carriers, have been stranded at sea worldwide due to port entry denials in many nations.
Analysts said the company’s potential bankruptcy would be the largest container shipping failure in history, dwarfing all previous carrier bankruptcies.
The world’s seventh largest box shipping line was put under receivership on September 1, a day after it filed for court protection after creditors, led by the state-run Korea Development Bank, rejected its self-restructuring plan worth KRW500 billion (US$446 million), saying it was not enough to help it get back on its feet, said a report from Yonhap News.
A receivership is a remedy available to secured creditors to recover amounts outstanding under a secured loan in the event the company defaults on its loan payments.
“We decided quickly to begin court receivership for Hanjin Shipping, the country’s leading shipper and the world’s major container shipping line, given its presence in the local shipping industry and its impact on the economy as a whole,” the Seoul Central District Court said.
The court appointed a local accounting firm to submit a report on the shipping line’s status by September 28.
Since late last month, some of Hanjin Shipping’s fleet have been denied access to ports in China, Japan, Singapore, India, and other nations as workers demanded the carrier pay fees in arrears and in cash in advance.
The shipping line said one of its vessels was denied passage through the Suez Canal. Hanjin Shipping has a fleet of 98 ships directly run by itself, including its own 37 vessels.
With the receivership application accepted, the company got a chance to revive itself, but it is still unclear whether it can avert liquidation.
Hanjin Shipping’s assets are frozen during a deliberation period, and new management is required to come up with a new rehabilitation plan by November 25. Its debts are estimated at some $6 trillion as of the end of June.
Hanjin Shipping has been striving to cut its chartered rates and extend the maturity of debts in the face of worsening financial health stemming from a continued fall in freight rates.
There is speculation that Hanjin Shipping may be liquidated as its fleets are being seized by creditors, forcing its clients to cancel their contracts with the carrier.
Hanjin Shipping said earlier one of its container vessels was already seized in Singapore by a creditor, as the court-led rehabilitation does not apply overseas.
Also, Hanjin Shipping said earlier its membership in the CKYHE shipping alliance has been suspended, which means that its cargo shipping may face further troubles.
Its Asian shipping partners are rushing to find alternative arrangements to ship electronics, clothing, furniture, and other goods as retailers in the U.S. and Europe are stockpiling for the holidays and rivals are boosting freight rates.
South Korea’s LG Electronics Inc. said it is canceling orders with Hanjin and seeking alternative options. The electronics giant had been shipping some 20% of its cargo through the shipping liner, while compatriot Samsung Electronics Co. had been using the carrier for about 40% of its shipments.
Barred at ports
Meanwhile, the receivership filing has sent ripples through the country’s cargo export community as some vessels of the box liner are being denied entry to Busan port, and its clients are struggling to find alternatives for their shipments, added the report.
Hanjin Shipping accounts for roughly 10% of the cargo processed at Busan port, the country’s largest seaport.
The country’s maritime ministry said earlier it will work to help smooth out flows in the cargo trade for local exporters and importers by putting in substitutes for Hanjin’s vessels that may be seized.
Hyundai Merchant Marine Co., the country’s No. 2 shipper, plans to deploy 13 ships on Hanjin Shipping-operated routes to the American and European regions.
Hyundai Merchant Marine, currently under a creditor-led debt restructuring scheme, may seek to take over Hanjin Shipping’s healthy assets, such as port terminals and global business networks.