The South Korean government, long a bastion of support for the nation’s big conglomerates, is sticking to its hard-line stance on Hanjin Shipping Co Ltd, whose collapse is roiling global supply chains.
Since the seventh-largest container carrier in the world filed for court receivership late last month, the government has sought to limit the impact on the export-dependent economy and Hanjin customers, but is otherwise leaving the company to fend for itself.
“It now is entirely up to the court,” a government official closely linked to the matter said, declining to be named due to the sensitivity of the issue.
Photo: Reuters
South Korea has said no government or central bank money would be directly injected into firms undergoing restructuring in the ailing shipping and shipbuilding industries.
Instead, it has extended aid to small and medium-sized businesses jolted by the restructuring process, dishing out cheap loans, and providing funds to maintain shipbuilding jobs and retrain workers in hard-hit regions of the nation.
The government has also taken measures such arranging for rival shipper Hyundai Merchant Marine and smaller carriers to deploy ships to routes that were served by Hanjin.
The Korea Development Bank has also discussed arranging a merger between Hyundai Merchant Marine, itself under creditor-led debt restructuring, and Hanjin.
That effort ended when Hanjin sought court receivership after lead creditor Korea Development Bank halted its support, Hanjin executive Kim Hyun-seok said last week.
The bank, which is also Hyundai Merchant Marine’s lead creditor, would be willing to back Hyundai Merchant Marine’s acquisition of Hanjin assets if it makes business sense and depending on the outcome of the receivership process, a bank official said.
“Although we are considering ways to absorb Hanjin’s market share, Hyundai Merchant Marine is currently primarily focused on supporting cargo owners to minimize their difficulties,” a Hyundai Merchant Marine spokeswoman said.
The tougher government line with Hanjin marks a departure.
Last year, the Korea Development Bank and the Export-Import Bank of Korea pledged 4.2 trillion won (US$3.8 billion) in loans and equity to Daewoo Shipbuilding & Marine Engineering Co Ltd, the world’s largest shipbuilder.
That drew criticism after Daewoo Shipbuilding, which received a bailout about 15 years ago, shocked investors with a first-half operating loss of about 3 trillion won.
Korea Asset Investment Securities general manager Kong Dong-rak said the government’s decision was based on the cost of reviving Hanjin, given the high charter fees Hanjin is paying to shipowners and the industry’s bleak short-term prospects.
Hanjin had debt of 6.1 trillion won at the end of June.
“The government decided it was time to cut them off because they knew they were sinking,” Kong said.
Playing hardball with Hanjin, with just 1,428 employees in South Korea, is easier to do politically than with Daewoo Shipbuilding, which employs 38,000.
“Lazy thinking that the government will have no choice but to help shippers if they run into problems has ended up hurting trading companies,” South Korean President Park Geun-hye said at a Cabinet meeting yesterday. “We will not sit silently by as corporate managements who do not aggressively try to recover their businesses wait for the government to solve everything.”
A Hanjin spokeswoman declined comment.
Financial regulators blamed the carrier for a lack of information.
“We tried to set up countermeasures for logistics issues which will arise from Hanjin’s court receivership, but we were unavoidably limited as Hanjin did not respond to any requests from creditors for information about cargo owners and sailing plans,” South Korean Financial Services Commission Chairman Yim Jong-yong told a parliament hearing last week.
The South Korean Ministry of Trade, Industry and Energy has been helping cargo owners and exporters, but not Hanjin itself, a ministry official said.
“All additional help that goes to Hanjin should be limited to supporting the offloading of cargoes. No more,” an official directly involved in discussions with creditors said.
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