When the storm is coming you can run, but you cannot hide… once the storm hits, there’s no safehaven. Hanjin Shipping, South Korea’s largest carrier filed for receivership to determine the bankrupt company’s liquidation of assets after the cease of funding for the self-rescue plan.
Creditor banks, led by Korea Development Bank (KDB), decided to suspend financial backing to Hanjin Shipping as of September 4, stopping in its tracks Hanjin Group’s plans to reduce the shipping line’s free-falling debt.
For Hanjin Shipping, who registered losses over US$400 million in H1 2016, receivership is the only feasible way to liquidate assets, process that should be completed within the fourth quarter. While Hanjin Shippin’s future lies in the shadows of uncertainty, the South Korean government has announced a plan for fellow citizen carrier Hyundai Merchant Marine (HMM) –and Hanjin’s main competitor- to fill in for the shipping line in the most active trade routes to minimize impact on cargo flow.
This measure has strengthened the rumour that HMM would have plans to merge with the bankrupt carrier. Sources close to HMM corroborate there is interest in some of Hanjin’s most profitable assets, but there has not been any official confirmation of formal M&A activity.
The maritime transport industry has been operating with losses since end-2015, and according to analysts, negative numbers could be as high as US$5 billion for 2016. Neither M&A, cost-cutting policies or voyage suspension have been enough to make a dent in the overcapacity that has forced prices on a downward spiral.
The filing for bankruptcy for Hanjin, who has 1,500 employees, is the largest in maritime transport industry, exceeding the collapse of United States Lines in 1986.
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