17-10-2016

Hanjin Reaches Out To Europe Shipping Giants to Sell Ships

Hanjin

Debt-ridden Hanjin Shipping Co. will reach out to major European shipping companies as early as this week to tap interest for at least five of its vessels as it tries to raise funds to unload stranded cargo, pay off creditors and re-emerge as an Asia regional carrier, people involved in the matter said.

“The sale sign is up,” one of those people said. “They will reach out to Maersk Line, Mediterranean Shipping Co. and others to sell some of their biggest ships that can go for up to $90 million each.”

The South Korean bankruptcy court handling Hanjin’s insolvency proceedings said Thursday it plans to dispose of the firm’s sales and marketing network for its Asia-U.S. route as well as some ships. Hanjin said it would receive letters of interest from potential bidders by Oct. 28 and binding bids by Nov. 7.

A.P. Moller Maersk A/S, the Danish conglomerate that owns Maersk Line, the world’s biggest container operator, said last month it is looking for acquisitions to grow its market share. Geneva-based MSC is the second biggest operator and is also looking for acquisition opportunities.

But another person said Korean peer Hyundai Merchant Marine Co. will be first in line to cherry-pick on Hanjin’s ships, which include five 13,000-container ships. Both the Korean government and Hanjin’s main creditor, Korea Development Bank, have said they would back HMM in buying Hanjin assets, provided such a move would help it stay competitive. KDB is also HMM’s main creditor.

HMM is looking to secure Hanjin’s slice of moving Korea’s exports to Western markets, but would need more capacity to achieve it and keep bigger competitors like Maersk and MSC from winning major shipping contacts from electronics behemoths like Samsung Electronics Co. and LG Electronics Corp.

HMM is negotiating to join the 2M Alliance, comprising Maersk and MSC. This puts the two European giants into a dilemma: Buy Hanjin’s ships and grow their capacity, or stay put and allow HMM to make the move and reap the benefits of a partner becoming a major player in trans-Pacific routes. Alliance partners share ships and port calls that save them millions of dollars in operating costs.

The Port of Long Beach said Wednesday that container volumes in September fell 16.6% from a year ago, as the effects of the Hanjin bankruptcy reached West Coast ports.

Hanjin Shipping accounted for about 12.3% of the port’s total containerized volume.

Hanjin filed for bankruptcy protection in August. At the end of the second quarter, Hanjin had total debts of $4.2 billion.

Hanjin has until December to submit a rehabilitation plan to the bankruptcy court, which will then decide whether it can continue operating or be liquidated.

Hanjin hopes the court will accept the plan which will see it continue operating as in intra-Asia operator. Before the bankruptcy protection filing, Hanjin was the world’s seventh-largest operator in terms of capacity serving major trade routes across the Pacific and Atlantic Oceans.

But with much of its fleet now idle and many of its chartered ships returned to owners, it has slipped to 17th place.

“The court’s decision will largely depend on whether KDB and other creditors will extend Hanjin a lifeline to operate as a regional carrier,” said Lars Jensen, chief executive SeaIntelligence Consulting in Copenhagen. “The choice is liquidate Hanjin and take significant losses or keep it alive as a small operator, hoping its assets will appreciate in the future.”

Beyond the five 13,000-container vessels, the remaining of Hanjin’s 37-ship fleet are mostly Panamaxes, which carry fewer than 10,000 containers. Such vessels are becoming obsolete in the wake of the widening of the Panama Canal earlier this year. That expansion allows ships moving 12,000 containers or more to pass through the isthmus.

Source: Wall Street Journal

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