South Korean authorities are mulling the option of having Hyundai Merchant Marine Co., the country’s second-largest container carrier that came under state-run Korea Development Bank after bailout through debt-to-equity swap, acquire “strong” assets of Hanjin Shipping Co. after it goes insolvent.

The merger option is off the list as Hyundai Merchant Marine would have to take over debt of Hanjin Shipping as well.

“We are aware of the concerns of national competitiveness in shipping when Hanjin Shipping goes under court receivership,” said Jeong Eun-bo, vice chairman of the Financial Services Commission after heading an emergency government meeting on Hanjin Shipping.

The cargo fleet and routes that generate profit, vessels, overseas operational network, and key manpower will be saved, he said.

Hanjin Shipping is the country’s largest and eighth in global rank, running a fleet of 101 containerships and 44 bulk carriers.

Its board directors on Wednesday vote to apply for court protection after creditors on Tuesday decided against financing fresh funds and keeping the shipper on lifeline.

The trouble is Hanjin Shipping has already handed over lucrative assets to the group in exchange for rescue funds and debt purchase. They include the shipper’s 59 percent stake in Pyeongtaek Container Terminal, 50 percent stake in Busan New Port, operating rights of 8 Asian routes, and 21.3 percent stake in Tan Cang Cai Mep International Terminal in Vietnam.

The government would filter out the remaining healthy assets of Hanjin Shipping including various ports, operation rights of sea routes, vessels, and solid operation network that can contribute to the domestic industry.

Authorities believe the impact from Hanjin Shipping’s doom on the financial market would be limited as its troubles have long been factored in its stock price and creditworthiness.

“Loss reserves from Hanjin Shipping heading to court program would be manageable,” Jeong said.

The banking sector has piled up 949.7 billion won ($851 million) in case loans to Hanjin Shipping go sour. Banks would have to set aside additional 285.6 billion won. Individuals own 65.5 billion won in Hanjin bonds, and authorities are looking into rescue program for them, he said.

By Chung Seok-woo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]