Creditors Weigh New Hanjin "Self-Rescue" Plan

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By MarEx 2016-08-26 17:35:43

Korea Development Bank expressed skepticism on Friday about a final "self-rescue" plan from Hanjin Shipping, leaving open the possibility that Hanjin could soon be put into receivership. 

KDB, Hanjin’s largest creditor, said that there were "no differences between the previous self-rescue plan and the new one." 

Hanjin has until September 4 to convince its creditors of a viable restructuring plan. The deadline has already been extended by one month. 

In its new plan, Hanjin proposed to sell stock to its chaebol affiliate Korean Air Lines in order to raise $360 million, plus an additional $90 million from asset sales. The numbers correlate closely to its earlier proposal; creditors have said that they want to see it raise at least $620 million. 

In total, Hanjin owes roughly $5 billion to its creditors, and it will need at least $1.2 billion in liquidity through the end of 2017. The firm lost $400 million in the first half of this year.

Hanjin says that it could reduce its liquidity shortfall by renegotiating charter rates, but so far it has not made significant progress in convincing its shipowners to give it leeway. Some allege that the line is already behind on its charter payments; one of Hanjin's chartered-in bulkers was arrested for non-payment of charter fees earlier this year. 

KDB has been bolstering its capital reserves with government assistance in anticipation of loan losses from Hanjin, Hyundai Merchant Marine and troubled shipyard Daewoo Shipbuilding and Marine Engineering. 

The South Korean government, which has come under criticism for extending aid to DSME, announced earlier this month that it would not provide direct assistance to Hanjin. In the event that Hanjin cannot meet its creditors' deadline for a restructuring agreement, Financial Services Commission chairman Yim Jong-yong said that regulators would deal with any fallout on the basis of "principles."