A report in WSJ says that Hanjin Shipping Co has applied for a creditor-led debt restructuring to avoid bankruptcy, reviving talk of a possible merger with rival Hyundai Merchant Marine Co. (HMM).
It could be merged as a part of the government-led restructuring of ailing industries and companies, according to government sources.
Both Hanjin Shipping Co. and Hyundai Merchant Marine Co. (HMM) are in hot water, but they are different from each other in a debt structure.
Unlike HMM, Hanjin Shipping has a lot of non-bank debt, which makes it difficult for the main creditor Korea Development Bank (KDB) and other creditor banks
to manage the company under a creditor-led restructuring program.
Both Hyundai Merchant Marine and Hanjin Shipping saddled with respective debt of 4.8 trillion won and 5.6 trillion won have sought debt workout with their bank creditors.
Unless Hanjin Group comes up with a clear plan on this, it will likely lose its leadership of the company in the restructuring process. In this case, creditors are more likely to integrate Hanjin Shipping into HMM.
The merger option was discussed during a government meeting of the Ministry of Strategy and Finance, the Financial Services Commission (FSC) and the Ministry of Trade, Industry and Energy on Sunday to address the troubles in the country’s shipping and shipbuilding sectors.
The government has decided to approach the problems of the two ailing shippers as one. The management control of the two will fall under the single main creditor the Korea Development Bank once
creditors accept to take them under workout programme.