Hanjin Shipping Co. (117930)’s Chief Executive Officer Kim Young Min resigned, taking responsibility for two successive years of losses at South Korea’s largest shipper and a delay in getting financial support from creditors.
Kim, 58, will stay until a replacement is found, the Seoul-based company said in an e-mailed statement today. Kim was appointed as CEO in January 2009 after 20 years with Citigroup Inc., and his term was to end in March 2015.
Shares of the container-to-commodity mover, which last month received a loan from affiliate Korean Air Lines Co. (003490) to ease a “temporary” liquidity shortage, fell for a fifth straight day in Seoul. Laden with debt, Hanjin is among liners battling a global overcapacity and slump in cargo rates caused by China’s weak iron-ore demand, factors that pushed STX Pan Ocean Co. (028670) to file for a court receivership in June.
“There’s no good news for Hanjin right now,” said Yun Hee Do, an analyst at Korea Investment & Securities Co. in Seoul. “The company hasn’t been able to make money recently and its interest payment has been increasing. There’s quite a sizable amount of debt coming due next year for Hanjin.”
Korean Air said last month it will provide 150 billion won ($141 million) to Hanjin to help ease the company’s liquidity shortage. The shipping line has 736.4 billion won of debt and loans maturing next year, compared with 58 billion won in 2013, according to data compiled by Bloomberg. Its cash and cash equivalent was 506.6 billion won at the end of June.
Hanjin Shipping’s $150 million of convertible notes sold in July 2011 were yielding 9.232 percent today compared with 9.184 percent at the start of the month, according to Bloomberg-compiled prices.
The stock fell 3.2 percent to 6,870 won at the close of trading in Seoul today. Hanjin has slumped 43 percent this year, compared with a 1 percent decline in the benchmark Kospi index. Hyundai Merchant (011200) dropped 7.9 percent today and STX Pan Ocean declined 3.9 percent in Seoul.
Hanjin Shipping is considering selling new shares, loans and perpetual bonds to raise funds to repay its debt and improve finances, Korea Economic Daily said on Oct. 31, citing unidentified company officials. Sonya Cho, a Hanjin Shipping spokeswoman, said a share sale is among options being considered by the company.
Korea Development Bank and other lenders may provide short-term loans to the shipping company, Maeil Business Newspaper said today, citing financial industry officials it didn’t name. Hanjin posted a loss in each of the past 10 quarters.
Korean Air, the nation’s biggest airline, is the largest shareholder of Hanjin’s parent Hanjin Shipping Holdings Co. They are both part of the Hanjin Group, which also has aerospace-related businesses.
Hyundai Merchant Marine Co., the country’s second-biggest shipping company, collected 156 billion won in a share sale last week. That was less than the 214.5 billion won the company expected to raise, according to a Nov. 4 regulatory filing.
Korea Development Bank bought 224 billion won of bonds sold by Hyundai Merchant last month to help the shipping company refinance its maturing debt. About 462.7 billion won of debt and loans are due next year, according to data compiled by Bloomberg.
STX Pan Ocean, South Korea’s biggest commodities-shipping company, went under court protection in June with a net debt of 5.37 trillion won at the end of 2012. The company has submitted its revival plan to the court in Seoul, which included a debt-for-equity swap and a rescheduling of loans.
Spot rates to haul container cargo from Asia to Europe, the world’s busiest trading lane, have dropped 5 percent from this year’s high, according to the Shanghai Shipping Exchange. Those from Asia to U.S. west coast dropped 32 percent to $1,718 per 40-foot box.
The Baltic Dry Index (BDIY) fell for three years since 2010, touching a record low in February last year of 647 because of slowing demand for moving iron ore, a key ingredient in making steel, to China. The gauge has since more than doubled to 1,581 as of Nov. 8.
Hanjin Shipping narrowed losses to 121.8 billion won in the first half, from 346.6 billion won loss a year earlier.
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