South Korea’s oldest shipbuilder Hanjin Heavy Industries & Construction Co. enters joint management with creditors after it signed workout agreement with its creditor group on Wednesday.

The shipbuilder in a disclosure statement said it entered workout program with nine creditor institutions led by its main creditor Korea Development Bank (KDB), four months after it applied for the procedure to seek debt relief and bailout.

Under the agreement, the creditors will inject additional 120 billion won ($103 million) on top of 130 billion won they provided in February. In addition, the company would benefit from 100 billion won worth interest relief and rollover through debt-to-equity conversion by the end of December when the workout contract ends. Cho Nam-ho, chairman and largest single shareholder, won’t lose management control. Hanjin Heavy Industries Holdings is the largest stakeholder in the shipbuilder with 38.2 percent. Cho owns 46.5 percent in the holdings company.

The shipbuilder in return promised to sell 2 trillion won worth assets including its energy units Daeryun Power Co. and Byeollae Energy Co.

It sought creditors’ bailout as it was short of 250 billion won in immediate liquidity. Unlike the three major counterparts that all demand debt relief from creditors, Hanjin’s lenders easily agreed to the company’s request as it does not have offshore ventures that posed as the biggest burden for other shipbuilders and its debt structure is less complex since its borrowings are mostly from banks.

Creditors also value highly of the Subic Shipyard in the Philippines. The creditors generously agreed to provide refund guarantee, a form of security that a financial institution would pay back advance received to ship owners if the shipbuilder fails to deliver ship on time, for Subic Shipyard. The Subic Shipyard that Hanjin Heavy Industries constructed in 2007 has stayed lucrative despite prolonged slump in shipbuilding industry.

Moreover, its union offered its agreement to go along with the restructuring plan, also helping to speed up the decision.

By Park Yong-beom

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