S Korea’s Hanjin looks to sell European business
Beleaguered shipping group accelerates asset sales as part of break-up
Hanjin Shipping is looking to close its European business and step up its asset sales as part of the beleaguered container line’s break-up amid a prolonged slump of the global shipping industry.
Saddled by debt and onerous contracts, and with industry overcapacity depressing freight rates, Hanjin filed for bankruptcy protection in late August after creditors withdrew financial support.
That prompted the Seoul Central District Court to kick off a process to break up the company, which the court said included selling the company entirely. Hanjin said on Monday that it wanted to close all its 10 branches in Europe, including its regional headquarters in Germany.
“The profitability of our European business has fallen a lot so we are seeking court approval to shut it down,” said Hanjin, adding that the court could approve the company’s request as early as this week.
Shares of the South Korean company fell 12 per cent on Monday, underperforming a 0.5 per cent rise in the benchmark Kospi index. The company’s market capitalisation has fallen 72 per cent this year.
Hanjin, under court protection, is accelerating its sale process for most of its assets to pay back debts totalling Won6tn ($5.4bn). It is in talks to sell a 54 per cent stake in a terminal at Long Beach Port to Mediterranean Shipping, while it has also put its Asian-US business up for sale with a November 7 deadline for bids. Hanjin is also planning to lay off half of its 700 land-based employees in South Korea.
“This was very much expected. It is a concentrated effort by the court to sell down the company’s remaining valuable assets and garner as much sales proceeds towards debt retrial,” said Rahul Kapoor, director at Drewry Financial Research Services.
However, Mr Kapoor expressed doubt over how popular the asset sales could be for potential bidders as the industry is affected by overcapacity. “Container shipping is a service business and anybody acquiring it would be worried about potential legal suits as well, despite the sale being ringfenced,” said Mr Kapoor.
“Why would one pay for a ghost network when the credibility of that network has been under threat and we are also uncertain what value there is in these assets. Most of the customers have already moved on.”
However, Hyundai Merchant Marine, Hanjin’s crosstown rival, said it was considering buying some of Hanjin’s assets including its US-Asia route. “We’re reviewing the possibility to see if there would be any synergies with our existing businesses,” said Hyundai Merchant.
Hanjin’s bankruptcy created a global logistics logjam last month with many of its ships seized by overseas creditors and stranded at sea, unable to dock at ports. The company said on Monday that some 80 ships of its 97 container vessels have completed cargo unloading.