By Joyce Lee
SEOUL (Reuters) – The South Korean court overseeing Hanjin Shipping’s receivership said a rehabilitation plan is “realistically impossible” if top priority debt such as backlogged charter fees exceed 1 trillion won ($896 million), South Korea’s Yonhap newswire reported on Wednesday.
Hanjin Shipping, the world’s seventh-largest container carrier, filed for receivership late last month in a South Korean court and must submit a rehabilitation plan in December.
With debt of about 6 trillion won ($5.4 billion) at the end of June and the South Korean government’s unwillingness to mount a rescue, expectations are low that Hanjin Shipping will be able to survive.
Top priority debt means claims for public interests, which are paid first to creditors and include cargo owners’ damages and unpaid charter fees, Yonhap reported citing the Seoul Central District Court.
Backlogged charter fees that occurred after Hanjin Shipping’s court receivership have topped 40 billion won, while cargo owners’ claims for damages are expected to begin in earnest after 3-4 weeks have passed from original delivery schedules, the report said.
Court officials were not immediately available for comment.
Hanjin has begun returning chartered ships to their owners and is trying to secure enough funds to help unload an estimated $14 billion in cargo initially trapped on its ships around the world.
The company had a total of 141 vessels, including 97 container ships as of early September. Out of the 97 container ships, 60 were chartered and 37 owned by Hanjin.
Dozens of ships remained anchored off ports while Hanjin tries to secure funds to onload them and to arrange court protection from creditors seizing them for unpaid bills. Some face other challenges to unload their cargos as thousands of containers pile up, creating havoc ahead of the crucial holiday shopping season.
Shares in Hanjin plunged more than 20% to a record low after the report, which lent support to the view the company will slide into liquidation.
Rival shipping company Hyundai Merchant Marine Co Ltd (HMM) surged 16% to a near two-week high.
“HMM is the only national shipping company that is left to take care of what Hanjin Shipping was in charge of for now,” said Cho Byung-hyun, a stock analyst from Yuanta Securities Korea.
“The market is expecting HMM to take back Hanjin’s pie from the industry though there is still some possibility that shipping companies from China, Taiwan, or Hong Kong would come in.”
($1 = 1,112.7000 won)
(Additional reporting by Dahee Kim; Editing by Lincoln Feast)