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(LEAD) Banks' credit exposure to Hanjin Shipping estimated at 1.02 tln won

All Headlines 10:54 August 28, 2016

(ATTN: ADDS more details in paras 12-13)

SEOUL, Aug. 28 (Yonhap) -- Local banks' credit exposure to cash-strapped Hanjin Shipping Co. is estimated at 1.02 trillion won (US$915 million), but they have already set aside sufficient provisions against the loans, industry sources said Sunday.

According to the sources, the state-run Korea Development Bank (KDB), KEB-Hana Bank and other banks extended a total of 1.02 trillion won to the country's No. 1 shipper.

The main creditor, KDB, has credit exposure of 660 billion won, followed by KEB-Hana Bank with 89 billion won, NH Nonghyup with 85 billion won, Woori Bank with 69 billion won, KB Bank with 53 billion won and the Korea Export-Import Bank with 50 billion won, the sources said.

The sources said the banks have already set aside loan provisions against Hanjin whose fate is expected to be determined later this week.

The KDB-led creditors will decide whether to put Hanjin Shipping under receivership by Tuesday, as the shipper's new self-rescue scheme falls short of expectations.

On Thursday, Hanjin Shipping, under growing pressure from its creditors to secure more money to tide over a deepening cash shortage, submitted a stronger self-rescue plan. The new scheme includes sales of more assets and a capital infusion by its major shareholders.

But the creditors led by the KDB said the fresh self-restructuring measure is just shy of their demand.

According to the KDB, Hanjin Shipping said it would secure 400 billion won by selling stocks to its affiliate Korea Air Lines Co.

Hanjin Shipping needs some 1.3 trillion won over the next 18 months to pay back debt and run its business. The company, however, has claimed that some 400 billion won will be enough if it succeeds in cutting charter rates and postponing debt repayments.

Hanjin Shipping, currently under a creditor-led restructuring scheme, has made little progress in its negotiations with owners of its chartered fleet to cut leasing rates, one of the key prerequisites set out by creditors to avert receivership.

Market consensus is growing that Hanjin Shipping, the world's eighth-largest container shipper, may have to file for receivership before Sept. 4 when its creditor-led rehabilitation scheme ends.

According to the sources, the outstanding amount of bonds sold by Hanjin Shipping reached 1.2 trillion won as of end-June. Bondholders, mostly institutional investors, will face a huge loss if the shipper is put under receivership, they said.

But about half of the bonds are held by the Korea Credit Guarantee Fund, a state-run credit guarantee agency, the sources said.

The government stressed that even if Hanjin Shipping is put under court protection, it won't have any severe impact on the local banking industry and logistics sector.


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