The fate of debt-ridden Hanjin Shipping Co. remains yet uncertain with its parent group having missed the August 20 deadline to submit additional financial support measures to creditors to salvage its shipping unit from heading to court receivership. All eyes are now on whether the South Korean shipping company would successfully strike a deal with foreign ship owners to reduce chartering fees, a move that is expected to allow its creditors to be more lenient in providing additional financial support.

Hanjin Shipping creditors led by state-run Korea Development Bank had set last week as the unofficial deadline for Hanjin Group to provide additional liquidity support. However, the parent group was not able to come to a decision, leaving creditors to wait until September 4 when their conditional joint management of Hanjin Shipping expires.

A senior Hanjin official who asked to be unnamed said the group is able to inject 400 billion won ($365 million) in the ailing shipping unit, and financial support higher than that amount would put the group including Korean Air Lines Co. under risk, which is making it hard for Hanjin Group Chairman Cho Yang-ho to come up with a definite solution.

Liquidity-stricken Hanjin Shipping is known to need 1 trillion won to 1.2 trillion won until next year to stay afloat, and creditors have been insisting that its parent group should provide at least 700 billion won worth of funds to rescue the shipping company.

Hanjin Shipping has also delayed paying 600 billion won to 700 billion won worth chartering fees, port usage fees, and fuel expenses due to cash shortage.

As part of its own efforts, Hanjin Shipping is currently negotiating with foreign ship owners on reducing vessel leasing fees by 27 percent. Another senior official at Hanjin said negotiation with Canada-based containership management company Seaspan Corporation that had opposed to adjusting chartering fees has made progress after it agreed to an alternative plan of providing other support aside from reducing chartering fees. An unnamed creditor official also said that Hanjin Shipping is expected to sign a memorandum of understanding soon with its ship owners over vessel lease fees.

Another creditor official who asked to be unnamed said the creditor group would consider the plan of allowing Hanjin Shipping to convert more debt to equity, but under the condition that Hanjin Shipping settles immediate liquidity issues on its own. The current debt restructuring plan includes Hanjin Shipping converting 60 percent of its debt to equity and paying back remaining debt in five years with a five-year grace period. The creditor official said that if Hanjin Shipping fails to resolve immediate liquidity shortage issues on its own, it will be inevitable for the company to be on course for court receivership.

An unnamed official from the shipping industry also warned that the shipping company would not be able to avoid court receivership and insolvency if its parent company fails to narrow down differences with creditors in providing liquidity support no matter.

By Kim Jung-hwan and Chung Seok-woo

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