South Korean Government Says No Bailout for Hanjin
Amidst a deepening accounting scandal at Daewoo Shipbuilding & Marine Engineering, South Korea's government has been criticized by opposition lawmakers and the press for providing billions in support for the financially troubled yard. On Wednesday, the nation's Financial Services Commission indicated that it would not follow the same course with container carrier Hanjin Shipping, which is struggling to restructure its debt and maintain liquidity.
Yim Jong-yong, the commission's chairman, said at a press conference that the government did not intend to provide any financial aid to the line, which is trying to renegotiate loans with creditor institutions and reduce its rates on chartered-in vessels ahead of a September 4 deadline. Hanjin faces a liquidity shortfall of roughly $1 billion through the end of next year, and creditors want the company to handle at least $650 million through restructuring and stock sales before they begin to contribute. The government has urged the affiliated Hanjin Group to contribute as well.
In the event that Hanjin cannot meet the deadline, Yim said that regulators would deal with any fallout on the basis of "principles."
Yim’s comments on Hanjin contrasted with his remarks later in the press conference, when he said that the government remained committed to restructuring efforts at the nation’s Big Three shipbuilders.
Hanjin already received an extension from creditors allowing it an extra month to put a "self-rescue" plan together, but it has struggled to secure a critical reduction in charter rates on more than 90 chartered-in vessels. It says that it needs a 30 percent rate cut; one owner, Seaspan, says that the carrier already owes more than $10 million in missed charter payments.
In May, the Hanjin bulker Hanjin Paradip was arrested by a South African court for unpaid charter fees. A Hanjin spokesperson told Chosun Ilbo that charter fees went unpaid because the line “[had] yet to receive the money raised by selling ships and equity.”