SEOUL • The axe finally fell on South Korea's once-mighty Hanjin Shipping yesterday as a Seoul court declared it bankrupt.
Hanjin, which struggled for years under the weight of billions of dollars' worth of debt, filed for bankruptcy protection last August, owing US$5.37 billion (S$7.6 billion) as creditors refused to bail it out.
An accounting firm hired by the court concluded this month that Hanjin's liquidation value would be greater than its worth as a going concern. Hanjin, once South Korea's biggest shipping firm and the seventh largest in the world, has since been forced to sell most of its assets at home and abroad to pay off debts. Most of its 1,500 workers have been laid off.
"We will try to ensure the bankruptcy process would enable the firm to pay off debts to all debt holders in a fair and proper fashion," the court said. Trading in the firm's Seoul- listed shares was also halted.
Hanjin's downfall represents the biggest bankruptcy in container shipping, and news of its impending doom last year caused shockwaves and chaos in the industry.
The firm has been rocked by a slump in global trade and a growth slowdown in China. But the seeds for its demise may have been sown when its owner's widow took the helm in 2007, despite having no experience. The demise highlights dangers inherent in South Korea's family-run "chaebol" culture.
Ms Choi Eun Young became CEO after the death of her husband Cho Sun Ho, a son of Hanjin Group founder Cho Choong Hoon. Ms Choi embarked on an expansion drive while ramping up fees, buoyed by a booming shipping industry. But as the global financial crisis set, Hanjin began to struggle, forcing Ms Choi to stand down. Her brother-in-law Cho Yang Ho took over in 2014.
During a parliamentary hearing last September into the company's slump, Ms Choi broke down, saying: "I had no expertise as I had been stuck at home as a housewife." But by then, the damage was done, despite millions of dollars being piled into the firm.
Its bankruptcy filing last year led to most of its fleet of 141 ships being banned from docking in many countries because of failure to pay ports for their services.
"Chaebol members succeed on the basis of family ties rather than competence," said Mr Chung Sun Sup, head of Chaebol.com, a website that tracks corporate assets and practices. While credited with leading the country's fast economic development over the past four decades, the father-to-son succession exposes chaebols to growing risks in the increasingly competitive markets, Mr Chung said.