Hanjin Struggles to Meet Creditors' Deadline

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By MarEx 2016-08-03 21:09:11

As a creditor-imposed deadline approaches, Hanjin Shipping has not yet managed to restructure its debts and charter rates, raising the possibility of court receivership. 

The Korea Times reported Wednesday that the troubled line has not yet reached new agreements with its shipowners and creditors. In order for Hanjin to avoid receivership, a group of creditors led by Korea Development Bank say that the carrier must improve its liquidity itself, and must have a firm plan in place by August 4. Sources from within creditor institutions told Korean media in July that they were considering extending the deadline to September 4. 

Korea's Financial Services Commission says that Hanjin Shipping needs funds totaling to $1 billion through 2018 to repay maturing debt and continue operating, a figure that Hanjin says that it could cut if it could negotiate a charter rate reduction and reschedule its debt payments. Creditors have pressured Hanjin to raise $600 million by selling stock; Hanjin Shipping's largest shareholder, Korean Air Lines, and Hanjin Group are expected to be the largest contributors.

Hanjin charters in more than 90 ships from multiple owners. The carrier is seeking a 30 percent reduction in rates, but industry sources say that it has had only limited success so far. One owner, Seaspan, says that Hanjin already owes more than $10 million in missed charter payments; Seaspan is adamant that it will not accept a charter rate reduction. “We've made it very clear. We'll not entertain the rate reduction," said Seaspan co-chairman and CEO Gerry Wang in an earnings call. “We have never had such situation before with any of our other customers and Hanjin Shipping has been the only one.”

Shipowner Danaos recently announced the details of a rate reduction deal for Hanjin's compatriot line Hyundai Merchant Marine (HMM), in which Danaos accepted a 20 percent reduction on 13 vessels for 3.5 years. In exchange, the shipowner receives shares and debt notes worth tens of millions of dollars. The rates would revert to the initial level at the end of the agreement period. 

Danaos has eight container ships leased to Hanjin Shipping, and it confirmed that its negotiations with the line were ongoing. 

Both South Korean container lines have been accepted into major shipping alliances, HMM into Maersk and MSC's 2M and Hanjin into "THE Alliance.