Hanjin in Restructuring Agreement with KDB

KDB headquarters building, Seoul

By MarEx 2016-04-25 21:24:26

Following its Friday announcement of an intention to enter bank receivership, South Korea's Hanjin Shipping submitted an application Monday with major creditor Korea Development Bank (KDB) for a debt restructuring plan.

Hanjin was said to be under pressure from the government and from KDB to accept restructuring. Competing Korean line Hyundai Merchant Marine (HMM) has already reached an agreement with KDB for a debt for equity swap, which will give the bank ownership of HMM. 

The Korean carriers’ rapid decline mirrors the state of the container market, where depressed freight rates are cutting into revenue, even as lines increase volume. Many of their competitors in the region and abroad – even industry leader Maersk Line – are expected to post losses for the first quarter of 2016.

Analysts from Drewry forecast that 2016 will be a challenging year for container lines as supply increases and demand falls. Drewry expects that the lines will lose a combined $6 billion this year, “largely because of the awful rate outlook. Drewry forecasts global freight rates to decline by 8.3% this year (after a 13% decline in 2015).”

In related news, a past chairwoman of Hanjin, Choi Eun-yeong, and her daughters Cho Yoo-kyung and Cho Yoo-hong are under investigation for insider trading relating to transactions they made prior to Hanjin's restructuring announcements. The family sold its entire stake in Hanjin – 0.4 percent, or about $2.7 million – between April 6 and April 20. The timing of the transactions may have saved them a combined $440,000, observers say. 

"We decided to launch the investigation because the family is suspected of using inside information for their stock trading," said Lim Kyu-joon, a spokesman for the Financial Services Commission. 

Choi is the sister-in-law of recent Hanjin Shipping Chairman Cho Yang-Ho, who stepped down Friday as part of Hanjin's restructuring arrangement with KDB. Cho Yang-Ho has not been named in the investigation.