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(2nd LD) Hanjin Shipping calls for help amid receivership threat

All Headlines 16:13 August 28, 2016

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SEOUL, Aug. 28 (Yonhap) -- Cash-strapped Hanjin Shipping Co. said Sunday that its creditors' extended help is crucial for its survival as its negotiations with owners of chartered ships over a cut in leasing rates and to postpone debt repayments to foreign creditors made significant progress.

The country's No. 1 container shipping line said Seaspan, a leading operator of container ships, has agreed to cut the leasing rate, and global financial companies such as Credit Agricole have expressed their consent to a proposal to delay the repayment of loans borrowed to buy container ships and other vessels.

"With the charter rate cut talks completed, it could have the effect of saving some 800 billion won (US$718 million) in cash, and we will have the effect of raising a total of 1.27 trillion won when a delay in loan repayments is considered," the shipper said in a statement.

The shipper said the shipping industry is very important for the national economy, adding "the government and the creditors' help is desperate."

Creditors of Hanjin Shipping, led by the state-run Korea Development Bank, have threatened to put the shipper under receivership, saying its fresh self-rescue plan is far shy of demands.

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.

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.

The KDB-led creditors expressed disappointment with the proposal saying they will decide the fate of Hanjin Shipping by Tuesday.

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.

Meanwhile, local banks' credit exposure to cash-strapped Hanjin Shipping Co. is estimated at 1.02 trillion won, but they have already set aside sufficient provisions against the loans, industry sources said Sunday.

According to the sources, the 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 sources also said that 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 a severe impact on the local banking industry or logistics sector.


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