Hanjin shares dive on fears over parent's cash help

Hanjin shares dive on fears over parent's cash help

Shares in South Korea's Hanjin Shipping plunged more than 10 per cent Tuesday on worries its parent will not stump up promised cash to prevent it from going under, while a court told it to return chartered vessels to their owners.

The world's seventh largest shipper is seeking bankruptcy protection at home and in the US after creditors refused to further help the firm, which groaning under US$5.37 billion (S$7.32 billion) of debt.

Its bankruptcy would be by far the largest in the history of container shipping, which is suffering is worst downturn in six decades because of slumping global trade and a slowdown in China.

To contain growing chaos in global shipping, the firm's parent Hanjin Group earlier promised to offer 100 billion won (S$121 million) to the firm - 40 billion won of which was personally offered by group chairman Cho Yang-Ho.

But board members at the group's holdings firm, Korean Air, have refused to approve the other 60 billion won aid. A series of emergency meetings, most recently on Sunday, have ended without resolution and no date has been set for another.

As many clients cancel shipping contracts and dock operators refuse to handle cargos for the crippled firm, a Seoul court on Monday told Hanjin to return its chartered vessels to save charter fees.

Shares in the firm plunged 10.3 per cent in Seoul to close at 1,130 won. Stocks dived more than 10 per cent early Monday before recovering on expectations for another board meeting at Korean Air but the meeting did not materialise.

Hanjin's shares have plunged about 70 per cent since the start of the year, .

"I think investors expressed disappointment over the series of bad news that kept piling up on Hanjin recently," said Noh Sang-Won, analyst at Seoul-based Donbgu Securities.

"Hanjin is in desperate need for cash right now, and apparently Korean Air is unwilling to give (any)," she said, adding some Korean Air directors reportedly raised concerns over spending money for a potentially doomed sister firm.

Under Seoul court receivership, Hanjin must submit a business revival plan by November 25 before the court decides whether to put it under a recovery programme or declare it bankrupt.

And the advisory to return chartered vessels - numbering more than 80 and accounting for more than half Hanjin's entire fleet - signals that it would be turned into a far smaller firm, Noh added.

"Reliability is key in this business and it would be hard for a far smaller Hanjin to earn back trust from shipping clients even if it manages to survive," she said.

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