Hanjin Shipping Gets 3-Month Reprieve From Creditors Amid Losses

  • Hanjin must have participation of shipowners, bondholders
  • Hyundai Merchant is in talks for charter rate-cut agreements

Hanjin Shipping Co., South Korea’s biggest container carrier, received a temporary reprieve from creditor banks amid mounting losses and debt from a prolonged slump in shipping rates.

Lenders will roll over the maturity of the principal and interest due on loans for three months while Hanjin Shipping negotiates with shipowners and bondholders to participate in the debt-restructuring efforts as a condition for the extension, main creditor Korea Development Bank said in an e-mailed statement Wednesday. The company, which has debt of about 5.6 trillion won ($4.8 billion), also will need to ensure it’s part of a major shipping alliance as a requirement, according to the statement.

South Korea is taking more active steps to help its shipping businesses cut debt and weather a global slump in demand that has led some cargo carriers to report losses or smaller profits. Worldwide, shipping companies have been shrinking their workforce and exploring consolidation after years of overcapacity depressed freight rates.

Shipping Alliances

“If any of the two conditions aren’t met, the debt-restructuring agreement will end,” Korea Development Bank said in the statement. “We will appoint external experts to draw up a restructuring plan for the company.”

Global shipping alliances are in the midst of a reshuffle. Last month, CMA CGM SA, China Cosco Shipping Corp., Evergreen Line and Orient Overseas Container Line signed a preliminary agreement to form a new group called Ocean Alliance, which could become the second biggest after a partnership between A.P. Moeller Maersk A/S and Mediterranean Shipping Co. 

Hanjin Shipping is part of the CKHYE alliance, which will lose two of its members -- China Cosco and Evergreen -- to the new partnership. Orient Overseas is a member of the G6 Alliance.

The Korean shipping company’s debt-restructuring efforts will help in discussions on alliance reorganization and normalizing its business, Hanjin Shipping said in an e-mailed statement.

Hanjin Shipping plans to raise about 410 billion won selling assets, including its stakes in bulk-shipping operations and properties, as part of a debt revamp, the company said in April.

Hyundai Merchant Marine Co., South Korea’s second-largest container carrier, has been under a three-month debt-restructuring plan since late-March.

Hyundai Merchant is in talks with shipowners to reach agreements by mid-May on reducing charter rates, Korea Development Bank said in a separate statement Wednesday. The bank’s comment follows reports by local media including Chosun Ilbo, which said Tuesday that Hyundai Merchant has agreed with a majority of overseas shipowners to cut charter rates on leased vessels.

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