The South Korean court in charge of Hanjin Shipping's receivership said Thursday that it plans to declare the carrier bankrupt, paving the way for its liquidation. There will be a two-week review period for creditors to weigh in on the court's decision, after which it is expected that Hanjin will cease to exist, ending its 40 year tenure as South Korea's largest container line.
In a statement, the court said that Hanjin's value in liquidation exceeds its value as a going concern – a view that is consistent with an assessment by consulting accountants PricewaterhouseCoopers. “Liquidating Hanjin is more economically viable than letting it continue business on a going concern basis,” PwC said in a December court filing.
PwC put the value of Hanjin's holdings at $1.5 billion. The court has already sold core assets like the container line's U.S. terminal operations (now owned by Hyundai Merchant Marine and MSC) and its Asia-North America shipping routes (purchased by Korean firm SM Group). The trans-Pacific routes and the business staff behind them will form the basis of a new shipping line, SM Shipping.
Longshoremen's fund extends claims to Hanjin Shipping’s parent company
The end of Hanjin Shipping may not mean the end of litigation over its debts. The New York Shipping Association-International Longshoremen’s Association Pension Trust Fund – the pension fund for union workers at the Port of New York and New Jersey – has asked U.S. and Korean bankruptcy courts to allow it to examine the financial connections between Hanjin Shipping and Hanjin Group, the conglomerate that controlled the now-defunct carrier.
The pension fund alleges that Hanjin Shipping owes $31 million for its withdrawal from future pension contributions. Shippers, carriers and terminal operators all pay into the fund under a port-wide collective bargaining agreement. The fund now seeks to determine whether the larger (and still solvent) Hanjin Group might also be held liable for the carrier’s obligations. So far, Hanjin Shipping’s executors have refused to provide the court with details of its connections with other Hanjin Group subsidiaries, like Korean Airlines. If the courts agree with the pension fund, it could potentially open the door to new lawsuits from other Hanjin Shipping creditors, who claim a total of $26 billion in debts.