South Korea's largest container shipping company, Hanjin Shipping Co. filed for receivership in Seoul Central District Court today.
Earlier in the day, Hanjin Shipping Co., the world's seventh-largest container carrier, chose to file for court receivership at a board meeting.
As Hyundai Merchant Marine restructured earlier than Hanjin Shipping secured necessary liquidity thanks to its self-rescue efforts such as selling off its shares of Hyundai Securities amounting to 1.2 trillion won (US$1.04 billion), the government authorities said that they could not give inordinate favors to Hanjin Shipping only.
Hyundai Merchant Marine Co., South Korea's second-biggest shipping line, has already come under creditor control in its own revamp. Hyundai Merchant Marine has not decided on a course of action.
While the news of Hanjin's failure will be welcomed across an industry plagued by low freight rates as a result of overcapacity, its exit from the market will mean its ships - chartered vessels will likely be returned to their owners could well be sold as distressed assets.
A Hanjin Shipping spokeswoman declined to comment on the report.
As such, the government will likely go to great lengths to salvage the shipping industry, note several shipping analysts.
Hanjin Group - the parent with businesses from airlines to shipping to mineral water - said it will put in all efforts to revive the industry.
Shares in the firm plunged to a six-year low Tuesday on news of the creditor cutting the lifeline. Hyundai Merchant jumped 7.5 percent, the biggest gain in two months, to close at 7,430 won. It also reached an agreement with shipowners to adjust charter rates on vessels the liner leased, a condition set by creditors as part of the restructuring plan. "Hanjin Shipping has 650 billion won (US$565 million) in trade arrears such as oil expenses at the moment".
Hanjin Shipping also said one of its vessels, the Hanjin Rome, was seized in Singapore by a creditor on Tuesday, while another vessel, the Hanjin Sooho, was denied entry to a port in Shanghai. Industry observers note that financial institutions are exposed to about 1.02 trillion won worth of risk in total, with Korea Development Bank being exposed the most at 675.7 billion won, followed by KEB Hana Bank at 124.8 billion won, NH Nonghyup Bank at 86.7 billion won, and Woori Bank at 69.7 billion won.
With 132 containerships and bulkers in its fleet, 59 of which it owns, Hanjin Shipping is the world's seventh-biggest shipping line by capacity according to consultancy Alphaliner.