NEWS

South Korea throws potential lifeline to bankrupt shipping firm

Published on: 6th September 2016

South Korea’s government has suggested that it could provide Hanjin with loans to keep it afloat.

hanjin480Government officials have indicated that Seoul could give over $90m in long-term funding at low interest rates if Hanjin is able to provide the necessary collateral.

The shipping company’s shares rose more than 20% on the news of a lifeline.

Yesterday, the company said it would seek bankruptcy protection in more than 40 countries to protect its fleet from being repossessed. Under bankruptcy protection a company can reorganise its debts and stop assets from being seized.

The immediate problem is the company’s ships, which remain out at sea because ports won’t accept them without being sure that port-fees will be paid. These vessels apparently only have fuel and food for crews for a matter of weeks. Hanjin Shipping’s parent company says it will try to raise the funds needed to sort this out.

However, whatever funds are raised, observers have suggested that the economics of the industry are unlikely to change soon. Hanjin is the world’s seventh-largest container line and has been unprofitable for four of the past five years. Few people are forecasting a big rise in demand for container shipping. The question may therefore be whether the South Korean government is prepared to bail out a company which would find it hard to survive otherwise.

 

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