Hanjin Shipping files for receivership, as ports turn away its vessels

Hanjin Shipping Co Ltd filed with the Seoul Central District Court for court receivership, a form of creditor protection, to freeze its assets on Wednesday. Banks led by state-run Korea Development Bank (KDB) withdrew backing on Tuesday, after financial assistance of more than 1 trillion won ($896 million), saying a funding plan by its parent group was inadequate to tackle the shipper's debt, which stood at $5.5 billion at the end of June.

The court will now decide whether Hanjin Shipping should remain as a going concern or be dissolved. Hanjin booking a net loss of 473 billion won in the first half of the year. The KDB's decision to stop backing Hanjin Shipping shows the government is taking a tougher stance with troubled corporate groups.

Hyundai Merchant, on a recovery track under a creditor-led debt restructuring program, will look to acquire its rival's profit-making vessels, overseas business networks and key personnel, South Korea's Financial Services Commission said. Government officials said Hanjin's receivership could also lead to the company's exclusion from a global shipping alliance, reducing its chances of survival. Hanjin said its relations with the alliance would end if the company ended up in bankruptcy.

Ports including Shanghai, Xiamen, Valencia, Savannah GA had blocked access to Hanjin ships on concerns they would not be able to pay fees. Hanjin Rome, was seized in Singapore late on Monday by a creditor, according to court information. Hanjin Sooho, with capacity of more than 14,000 TEUs, was stopped from entering the Port of Shanghai as creditors sought to have ports either deny entry or impound Hanjin-operated ships.

Charter rates for medium-sized container ships have dropped from around $26,000 a day in 2010 to $13,000 per day now, according to data from shipping consultancy Clarkson. Container rates from Shanghai to the U.S west coast have dropped from around $2,000 per 40-foot box in January 2010 to $596 per 40-foot box last week, data from the Shanghai Shipping Exchange shows. Shares in Hanjin Shipping have been suspended after plunging 24% on Tuesday.

(Reuters/Dow Jones)