South Korea’s debt-ridden Hanjin Shipping Co. will need 1.2 trillion won ($1 billion) to remain afloat over the next two years, including 670 billion won for this year alone even under a possible creditor-led restructuring program, according to a report written by Samil PricewaterhouseCoopers (PwC) on Thursday.

The report was based on the auditing company’s due diligence on the container carrier conducted for three months. The report shows the shipping company will need 450 billion won in the first half of this year alone. But the company’s self-rescue plan proposed on Monday is worth about 410 billion won at best.

Hanjin Shipping will be definitely short of operating capital even under the debt rescheduling program without creditors’ active role in providing financial aid. This is the reason why creditors are demanding additional self-rescue measures. Hanjin Shipping is asking for more help from creditors to meet short-term liquidity needs while the market condition is improving. But creditors maintain their earlier position that additional support is out of the question.

“There will be no additional financial support for Hanjin Shipping beyond the principle of the co-receivership of creditor banks based on a voluntary agreement because even its majority shareholder Korean Air Lines Co. is unwilling to help it,” said an official at KDB, the main creditor bank. “Think about Hyundai Merchant Marine Co. which is under the co-receivership of creditors. Not even a penny was given to it as additional financial support.”

The state-run KDB made it clear that the voluntary agreement, if signed, will not last long if the company fails to provide a management normalization plan within four months. “Even under this agreement, the company must complete management normalization backed by key measures, including ship lease fee settlement within four months,” said the KDB official.

The due diligence report served as an important rationale for Hanjin Shipping’s application for the creditor-led restructuring. Based on the report, Hanjin Shipping judged that it would face a cash shortage of about 1 trillion won by the end of this year unless the voluntary agreement is signed. Even under the agreement, there would be a cash shortage of some 670 billion won.

Hanjin Shipping is adding details on ship lease fee negotiations to its application submitted last Monday at the request of creditors.

By Park Yong-beom and Chung Seok-woo

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