Financially troubled Hanjin Shipping is struggling to come up with a self-rescue plan that meets the expectations of its creditors, amid growing concerns over a possible court receivership.
Korea’s largest shipping company was asked by its creditors to submit a rescue plan by Thursday, the second deadline after the company failed to meet the first deadline of Saturday.
This is projected to be the last call as the company is slated to meet the end of the creditors’ joint management on Sept. 4. The creditors initiated the joint management in May when Hanjin Group Chairman Cho Yang-ho gave up management rights and filed for a workout program over financial difficulties.
As part of the move to overcome the crisis, the parent group vowed in June to secure 400 billion won ($357 million) of new capital through issuing new stocks of Korean Air. The airliner is the largest shareholder of the shipping company with 33.23 percent of shares.
Hanjin Shipping also vowed to sell its terminals and office building to raise the funds.
The creditors, however, demanded that the shipping company secure at least over 700 billion won by negotiating charter fees cut and extending the maturity of ship loans, considering that Hanjin Shipping needs at least 1.2 trillion won by early next year in order to avoid insolvency.
Earlier this week, Korea Development Bank Chairman Lee Dong-geol warned that considering the court receivership is inevitable if the shipping company fails to come up with a substantial rescue plan.
Cho, however, has constantly expressed reluctance over releasing more than 400 billion won.
Speculation remains uncertain over whether Cho will decide to pour further funds into Hanjin Shipping as Korean Air is suffering from financial difficulties with a debt rate exceeding 1,000 percent.
Korea Investors Service has previously warned that the credit rating of Korean Air will be downgraded if it shoulders additional financial burden for Hanjin Shipping during the restructuring process.
According to financial sources, Korean Air is estimated to have suffered nearly 400 billion won of losses in the first half of this year due to Hanjin Shipping’s company drop in value.
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