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Korea Line Files for Receivership as Bulk Rates Fall

Jan. 25 (Bloomberg) -- Korea Line Corp., South Korea’s second-largest operator of dry-bulk ships, filed for receivership after a global oversupply of vessels caused rates to tumble to the lowest in almost two years.

The shipping line intends to maintain operations, it said today in an e-mailed statement, after making the filing at the Seoul Central District Court. The company, which didn’t say how large its debts were, is seeking to freeze assets.

Korea Line, unprofitable in six of the past seven quarters, halted its shares as it works to restructure debt. Dry-bulk rates have plunged 58 percent in the past year amid an expanding global fleet and slowing demand for commodities in China as the government works to cool economic growth.

“This is probably the best option left for Korea Line,” said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. “With the Baltic Dry Index where it is now, the company wasn’t earning enough to cover costs and debt.”

The Baltic Dry Index, a measure of rates for vessels used to ship iron ore, coal and other commodities, fell 1.8 percent yesterday to 1,345, the lowest since Feb. 4, 2009.

Posco, KepCo

Korea Line owned 51 vessels at the end of September. It ships iron ore, coal and liquefied-natural gas for customers including Posco, Korea Electric Power Corp. and Korea Gas Corp., according to its website. Korea Gas, Korea Electric and Posco all expect the filing to have little impact on operations, spokespeople said today when contacted by Bloomberg News.

Korea Line had been losing money as it was locked into long-term contracts to charter in ships. Daily rates to hire capsize vessels have fallen to around $8,000 from more than $100,000 two years ago, Korea Line said in the statement.

“We were under a lot of pressure because rates plunged, while we were paying a lot for chartering,” it said. “We had no choice but to file for court protection.”

Korea Line had total debts of 2.23 trillion won ($2 billion) at the end of September, according to its third-quarter financial statement. The shipping line made a 104.2 billion won loss in the quarter, the statement said. The company raised 86.6 billion won in a rights offer last month.

The shipping line dropped 1 percent to 25,200 won today before the shares were halted, giving it a market value of $371.6 million, according to data compiled by Bloomberg. The shipping line fell 40 percent in the past year, while the Kospi Index rose 25 percent. STX Pan Ocean Co., South Korea’s largest dry-bulk operator, dropped 16 percent in Singapore in the period.

Ship Orders

Daewoo Shipbuilding & Marine Engineering Co., the world’s second-largest shipyard, said it is scheduled to deliver two Very Large Crude Carriers to Korea Line in March. The shipyard has already received most of the money due for the oil tankers, it said. The company fell 0.6 percent to 40,300 won in Seoul.

STX Offshore & Shipbuilding Co. which holds orders for a VLCC and a capsize ship from Korea Line, plunged 4.9 percent, the most this year, to 33,150 won. The shipyard hasn’t started work on either vessel and the Korea Line filing will have little impact, it said in an e-mailed statement.

Hyundai Heavy Industries Co. said it has an order to deliver a capesize bulk carrier to the shipping line in December 2012. The shipyard received a 50 percent down payment when the contract was signed in 2008 and work is yet to begin, it said in an e-mailed response to Bloomberg News questions.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net; Seonjin Cha in Seoul at scha2@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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