Hanjin Shipping files for US bankruptcy protection, shares dive 30% limit

Hanjin Shipping Co Ltd has filed for bankruptcy in the United States to protect its vessels from being seized by creditors.
Hanjin Shipping Co Ltd has filed for bankruptcy in the United States to protect its vessels from being seized by creditors.PHOTO: AFP

SINGAPORE (REUTERS) - Shares of Hanjin Shipping Co, South Korea's biggest container line, slumped a limit 30 per cent on their first day of trading since filing for court receivership last week after lenders deemed the company's restructuring plans as insufficient.

The stock fell 370 won to 870 won, giving it a market value of 213 billion won (S$260.7 million) in Seoul trading. Hanjin Shipping shares had tumbled 24 per cent on Aug. 30, when trading was halted. The Seoul Central District Court accepted the company's filing for receivership on Sept 1 and has asked for a revival plan to be submitted by Nov 25.

Vessels of Hanjin - the world's seventh-largest container carrier with a 2.9 per cent market share - are getting stranded at sea and ports after the box carrier sought protection, roiling the supply chain of televisions and other consumer goods ahead of the holiday season.

Hanjin's woes show the container-shipping industry hasn't recovered from the troubles it has been facing since the 2008 global financial crisis hurt trade.

Hanjin on Sept 2 filed for bankruptcy protection under Chapter 15 at the Bankruptcy Court in Newark, N.J..

As of Sunday morning, 68 Hanjin vessels were stranded out at sea or at port in 23 countries, including one ship arrested in Singapore, according to the company. The Korean liner owns 59 of the 132 container and bulk ships in its fleet.

For US retailers, Hanjin's filing brings fresh concerns about delivery of goods ahead of the holiday shopping season. The chains are working to minimize delivery disruptions from cargo waiting to depart Asia, traveling on the ocean or arriving at ports, Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation trade group, said last week.

About 70 per cent of South Korea's overseas shipments is through sea, of which Hanjin Shipping accounts for about 6 percent, according to Cheong Seung Il, a trade ministry official. While the government doesn't expect a large impact on exports, there could still be some issues with machinery and textiles shipped via Hanjin, he said.

Hanjin Shipping is part of Hanjin Group, which also owns Korean Air Lines Co, the world's third-largest cargo airline. Korean Air loaned funds to Hanjin Shipping and bought shares in the container line in 2014 to become the biggest shareholder with 33 per cent. Korean Air said last week it estimated as much as 383 billion won losses on its Hanjin investments. Cho Yang Ho's Hanjin Group also counts airport services, logistics and mineral water among its businesses.

Meanwhile, Hyundai Merchant Marine Co, the second-largest container shipping company in South Korea, said it plans to add four vessels to the US starting later this week, and nine on Europe routes later this month.

Hanjin's US$1.8 billion in vessels also offer a takeover opportunity.

"Hyundai Merchant Marine seems to be the most likely buyer," said William Bennett, analyst at VesselsValue.com. Such a deal may also boost the AP Moeller-Maersk A/S-led 2M vessel- sharing alliance that Hyundai is due to join in April, he said. Hyundai Merchant has said it will consider buying some of Hanjin's assets, including vessels.