Hanjin Shipping Chairman to Give Up Control to Creditors
John Kim, April 25, 2016, 7:52 a.m.
Hanjin Shipping Co., South Korea's biggest container carrier long beleaguered by business slump and operating losses, said on Monday that it has presented an application to its creditor banks to restructure its debt in its last-ditch bid to get back on its feet. The self-rescue measures submitted to its creditors led by the state-run Korea Development Bank included a promise by Hanjin Group Chairman Cho Yang-ho to abandon his managerial control over the shipping unit, along with sale of assets, according to sources at the creditors.
Assets Hanjin Shipping is planning to sell off may include its office building in London, whose price is estimated at around 66.7 billion won (US$58.1 million), the sources said. But it has yet to be confirmed whether creditors and Hanjin Shipping discussed any contribution of the private properties of Chairman Cho and other family members with stakes in the shipping company as part of its self-rescue measures. The sources said the creditor banks plan to ask Hanjin Shipping to supplement its self-rescue measures by the end of this week before determining whether to approve them.
Hanjin Shipping and other local shippers have been struggling with falling freight rates amid a protracted slump in the world's economy. Hanjin Shipping has to pay off or refinance 500 billion won worth of debt that matures in the first half of the year. At the end of last year, Hanjin Shipping's total debt reached 5.6 trillion won. Earlier on Monday, South Korea's financial regulator said it will open an investigation into the controversial sale of Hanjin Shipping stocks by the family of its former chairwoman.
The Financial Supervisory Service (FSS) said it will look to see if Eusu Holdings Co. Chairwoman Choi Eun-yeong, former chairwoman of Hanjin Shipping, sold the financially troubled shipping company's stocks using undisclosed information to avoid hefty losses. According to a regulatory filing on April 22, Choi and her two daughters sold their entire 0.39 percent stake, or 669,248 shares, in the shipping company between April 6-20.
If company executives and major shareholders gain profits or avoid losses using undisclosed information that could affect the company's share prices, they could face punishments or fines by the financial authorities. "As Choi and her family are suspected of having sold their Hanjin stocks by using any undisclosed information to avoid losses, it is natural for the authorities to look into whether their selling is against the law or not," an FSS official said.
The planned probe is aimed at seeing if there was any illegality in the trading, the official said, adding the probe has nothing to do with the contribution of private assets by the company's large shareholders during its process of restructuring. Eusu Holdings, formerly known as Hanjin Shipping Holdings, has shipping-related affiliates under its wing. Hanjin Shipping is no longer an affiliate of Eusu Holdings.
In April 2014, Korean Air Lines Co. led by Chairman Cho Yang-ho acquired a 33.23 percent stake in Hanjin Shipping for about 400 billion won to become the biggest shareholder. Cho's younger brother Soo-ho ran the shipping company until he died in November 2006 and then his wife, Choi Eun-yeong, managed the cash-strapped company amid a prolonged slump in the shipping industry after the 2008 financial crisis. Shares in Hanjin Shipping have fallen 28 percent so far this year. It shifted to a net profit of 3 billion won in 2015 after inking a net loss of 423.33 billion won a year earlier.