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Hanjin pleads for its life with charterers, port operators for debt relief

HANJIN Shipping, South Korea's largest container operator by capacity, says it cannot survive without help restructuring debt from owners its chartered fleet and terminal operators, reports the Wall Street Journal.

"Our management has come to the conclusion that our own efforts alone may fall short of fully resolving the liquidity issues that we are facing," said Hanjin CEO Suk Tae-soo in a letter of appeal.



According to a Korean source CEO Tae-soo will be asked to return half of his salary, executive vice-president will return 30 per cent of their salaries, vice presidents will return 20 per cent.



The source also said the company will also cut personnel costs by 10 per cent, fringe benefits by 30 to 100 per cent and shutdown the staff restaurant as company headquarters. 



Hanjin, a unit of Hanjin Group, which also controls Korean Air Lines Co, last week submitted a formal request to state-run Korea Development Bank, its main creditor, to restructure its debt and provide an aid package in return for asset sales and charter rate cuts.



There is much speculation of a merger of Hanjin and its smaller rival, Hyundai Merchant Marine (HMM), which handles the bulk of South Korea's exports, have been unprofitable for several years, amassing debts as the global shipping market has been faced with excess capacity and plummeting prices.



Hanjin had debt of KRW6.6 trillion (US$5.7 billion) at the end of 2015. Hyundai Merchant Marine had KRW4.8 trillion in debt.



South Korea's Ministry of Oceans and Fisheries has since clarified its position on a possible merger and appears doubtful.



"There is a need to maintain the existence of the two companies when considering the impact a merger could have on South Korea's import and export-oriented economy and global shipping alliances, as well as Busan port's transshipment competitiveness," according to the statement, written in Korean.



"The creditor banks of the shipping companies are checking if each company's self-help plan is realistic before deciding whether to give further support."



A South Korean broker said both HMM and Hanjin would not want to merge to preserve their identities but the market is not in their favour, reports IHS Media.



Hyundai Merchant Marine, which is already undergoing a creditor-led restructuring, is also in negotiations with its shipowners to lower lease rates.



South Korean Finance Minister Yoo Il-ho has warned that without a meaningful reduction in rates, the government would have no other choice to put Hanjin or Hyundai or both under receivership.



KDB said a reduction of at least 30% in lease rates was necessary for the company to continue to operate and get financial assistance from creditors.
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