Hanjin Shipping fallout has less impact on finance industry

South Korea’s largest container shipping company, Hanjin Shipping Co. filed for receivership in Seoul Central District Court today.

According to local news report on August 30, the creditor banks – which include state-run Korea Development Bank and KEB Hana Bank – extended a combined 1.02 trillion won (US$912.48 billion) loans to South Korea’s top container carrier.

31 filed for a court-led restructuring scheme, after its creditors made a decision to halt their financial support to the shipper.

South Korea’s debt-ridden Hanjin Shipping Co.is teetering on the brink of becoming insolvent and falling under court receivership as its main creditor Korea Development Bank (KDB) rejected the final self-rescue plan that the troubled shipper submitted on Thursday questioning its feasibility and adequateness. Of the total, about 421 billion won worth of bonds publicly trade while 696.8 billion won have been privately placed.

The group has a range of logistics and transport businesses including flag carrier Korean Air.

South Korea’s ailing shipbuilders and shipping firms, which for decades were engines of its export-driven economy, are in the midst of a wrenching restructuring. KDB has already categorized Hanjin Shipping debt as “estimated loss” and has reserved full allowances. But major creditors including the state-run Korea Development Bank decided on Tuesday not to offer more help.

Hanjin Shipping is the world’s seventh-biggest shipping line by capacity and has a market share of 2.9 per cent, according to Alphaliner, a maritime consultant. Woori Bank, KB Kookmin Bank, and NH Nonghyup Bank have placed Hanjin Shipping debt under “doubt loans” and have also reserved 90 percent or more allowances, reflecting risk beforehand.

China past year merged China Ocean Shipping Group and China Shipping Group to form China Cosco Shipping Corp.as part of the government’s efforts to shrink industries beset by overcapacity while creating globally competitive businesses.

The process of court receivership will likely result in the company being dismantled, ending 40 years as the nation’s No. 1 shipper.

Hanjin Shipping had said Monday that some foreign banks had agreed to extend the maturity of its ship-financing debt, which should help ease its cash-shortage problem.

Ports including those in Shanghai and Xiamen in China, Valencia, Spain, and Savannah in the US state of Georgia had blocked access to Hanjin ships on concerns they would not be able to pay fees, a company spokeswoman told Reuters.

Hanjin Shipping operates about 60 regular routes worldwide, the company said, and ranked sixth in market share for Asia-North America shipping routes in the first half of 2016 based on cargo volume, according to trade data provider Datamyne.

Shipping industry economics have deteriorated.