Posted on August 8, 2016
By Xiaolin Zeng, IHS
Hanjin Shipping’s creditor banks gave it an extra month to lower charter rates, reduce loans from foreign lenders and reschedule bond payments, thus avoiding being placed into receivership.
“We’re still in talks with the tonnage providers and we’re diligently carrying on the discussions,” a Hanjin spokesperson said. Hanjin now has until Sept. 4 to complete all the relevant negotiations.
The company has 91 vessels chartered-in from 23 tonnage providers, including Seaspan, Danaos Corporation and Ciner Ship Management. Seaspan is strongly opposed to reducing charter rates and has made public statements to that effect.
Hanjin, which has already handed over management control to the Korea Development Bank, its largest creditor, is in talks to reschedule $130 million in debt due in 2017 and plans to sell assets valued at $400 million.
The South Korean media has reported that the Hanjin Group via Korean Air Lines will pump 700 billion South Korean won ($610.3 million) into Hanjin Shipping, but that has not been officially confirmed.
Hanjin could need 1.2 trillion South Korean won over the next two years without more funding, according to South Korea’s Financial Services Commission, a financial watchdog.
As of March 31, Hanjin had a working capital deficit of 2.85 trillion South Korean won ($2.4 billion). With long-term debt of 2.39 trillion won and shareholders’ equity of 733.3 billion won, the company’s gearing ratio is high at 3.26:1.
Were receivership the ultimate outcome for Hanjin, the company’s credit would fall to as low as D, according to Korea Investors Service, which in April downgraded the company to B-, and further lowered Hanjin’s rating to CCC when it became apparent that the company was having difficulties in its charter and debt renegotiations.
In the meantime, John Coustas’ Danaos Corporation said in its second-quarter earnings briefing that it is now in talks with Hanjin after accepting a 20 percent cut on the 13 ships it has on charter Hyundai Merchant Marine over a three-and-one-half-year period in exchange for $39 million in notes and 4.6 million shares in the company.
“We are pleased to have reached an outcome that will strengthen the financial profile of one of our important counterparts,” Coustas said. “Separately, Hanjin Shipping has publicly announced its intention to restructure its balance sheet and seek concessions from charter owners. Discussions are ongoing, and we cannot speculate on the timing or the nature of the resolution.”
Danaos, which earned $44.6 million in the second quarter, up from $38.1 million in the same period last year, has the largest exposure to Hanjin Shipping among listed shipping companies, with eight vessels.
Source: IHS
