Hanjin Shipping Falls as Credit Rating Cut One Level to BB+

  • Korea Ratings cites delayed earnings recovery, sluggish market
  • Container freight rates fell to four-month low in October

Hanjin Shipping Co., South Korea’s biggest shipping company, dropped to its lowest level on record after Korea Ratings Corp. cut its credit rating as mounting competition and weak freight rates undermine earnings.

The shares fell 16 percent Monday to 3,815 won in Seoul and have fallen 37 percent this year, compared with a 1.4 percent gain in Korea’s benchmark Kospi index. Hyundai Merchant Marine Co., the country’s second-biggest shipping company, was down 10 percent to 4,330 won and has dropped 55 percent in 2015.

Korea Ratings, the local affiliate of Fitch Ratings, cut Hanjin Shipping’s credit rating one notch to BB+ from BBB- because of a delay in earnings recovery and liquidity concerns amid a sluggish industry. Shipping lines globally have been selling assets, reducing workers and considering consolidations to stem losses as years of slowing global trade and overcapacity eat into rates.

“The credit-rating downgrade will increase the interest burden for Hanjin Shipping,” said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. “The shipping companies are already suffering because they’re not making enough money from moving goods with rates so low.”
Govt
Hanjin Shipping posted a 58 percent gain in third-quarter net income to 58.4 billion won ($50 million) after selling assets to raise cash. The unit of Hanjin Group, which owns Korean Air Lines Co., has posted four straight years of losses.

Spot rates to haul a 20-foot container to Europe from Asia fell 39 percent to $409 for the week ended Nov. 13, despite efforts by some shipping companies to raise the levy, according to the Shanghai Shipping Exchange. Rates dropped to a four-month low of $233 a box last month.

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