State-run Korea Development Bank (KDB) and other creditor banks of Hanjin Shipping are considering granting conditional financial aid to the shipper known to be in dire straits of running behind payments in container and ship leases, according to sources at creditor banks.

Although creditors are in agreement not to offer any new aid apart from existing debt relief, they could deliberate compensating for about 20 percent of 1.2 trillion won ($1 billion) the company needs at least to stay in business until next year if its parent Hanjin Group provides 80 percent of the funds.

Hanjin Shipping creditors offer aid of 20% of liquidity shortfall if Hanjin Group provides the rest

Container ship Hanjin Africa - Image: Ian Greenwood

In short, they are proposing to put up 240 billion won if Hanjin Group covers at least 960 billion won.

Still, it remains uncertain whether Hanjin Group can finance the liquidity shortfall. Hanjin sees its group-wide maximum financing capability stand at 300 billion to 400 billion won and if it goes beyond that, it would be detrimental to Korean Air, the flagship company of Hanjin Group, said a ranking official of the conglomerate.

Creditors are determined to let the shipper go bankrupt if its liquidity troubles are not solved by Hanjin Group.

Hanjin Shipping has been courting external investors and trying to sell asset sales to meet the shortfall of up to 560 billion won.

Hanjin Shipping is reportedly trying to sell its cargo terminal in Southeast Asia. The company is also looking for investment from non-performing loan funds, but there is little progress.

An investment banking official familiar with the Hanjin matter said Hanjin is not that broken enough to need NPL investment but it is not in a situation where it can attract fresh investment from overseas. “This ambiguity hampers negotiations with foreign funds,” the official added.

Source: Pulse