Korean peer Hyundai Merchant Marine to get first look at 37 container vessels

By Costas Paris 

Hanjin Shipping Co. will likely sell some of its most valuable ships as creditors scramble to secure whatever remains of Korea's biggest container operator as it heads toward liquidation, people involved in the process said Friday.

Those people said Korean peer Hyundai Merchant Marine Co. will be the first to look at Hanjin's 37 container vessels, with the focus on five 13,000-container ships, the biggest in the troubled carrier's fleet.

But it isn't certain HMM will find the money to buy the ships, which could go for around $90 million each.

"HMM will be the first to cherry-pick among Hanjin's vessels," one person said. "They would like to get the big ones, but that largely depends on financial backing from the government and Korea Development Bank." KDB is the shipping line's biggest creditor.

Hanjin filed for bankruptcy protection in August. HMM is facing its own financial problems, reeling under 5.2 trillion won ($4.54 billion) of debt after being unprofitable for several years and working on a massive restructuring program.

But both the government and KDB have said they would back HMM in buying Hanjin assets, provided such a move would help it stay competitive. 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 from winning major shipping contacts from electronic behemoths like Samsung Electronics Co. Ltd. and LG Electronics Corp.

HMM has said it is exploring all possibilities with Hanjin after the government raised the issue. A Hyundai spokesman said Friday it is too early to comment or to take any action, as Hanjin has until December to submit a rehabilitation plan to a Korean court, which will then decide whether it can continue operating or be liquidated.

Both the Korean government and KDB have said they won't pump any more funds into Hanjin except for money to unload some of the half-million containers stranded around the world, mostly destined to importers in the U.S. and Europe.

Yoo Il-ho, South Korea's deputy prime minister for economic affairs, said Friday that he expects 90% of the unloading of Hanjin containers to be completed by the end of October.

A U.S. bankruptcy judge on Friday expressed concern that Hanjin's efforts to cobble together a restructuring plan may be moving too quickly for U.S. creditors.

"It's very condensed," Judge John Sherwood of the U.S. Bankruptcy Court in Newark, N.J., said at a status hearing in the company's U.S. bankruptcy proceeding. "I'm just concerned that U.S. creditors will be asleep at the wheel, because it's a fast process."

"Liquidation is the most likely scenario unless the creditors decide to give [Hanjin] a lease of life as a small shipping company doing Asian trades hoping that at some point in the future it will generate some profit," said Lars Jensen, head of Sea Intelligence Consulting in Copenhagen. "But the days of Hanjin as a global operator are over, and the intra-Asia shipping market is highly competitive and very difficult for a new entrant with Hanjin's stained reputation to enter."

Buying the 13,000-box ships will help HMM to secure its place in the 2M shipping alliance made up of market leaders Maersk Line of Denmark and Geneva-based Mediterranean Shipping Co., the world two biggest container operators in terms of capacity.

The 2M alliance is dominant in Asia-to-Europe trade, handling about 34% of all containers shipped in the route. But it only commands 16% of the Asia-to-North America market, lagging behind two other shipping alliances that will start operating in April with shares of more than 35% each.

The rest of Hanjin's fleet are mostly Panamaxes, which carry fewer than 10,000 containers. Such vessels are fast becoming outdated 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.

In-Soo Nam and Tom Corrigan contributed to this article.

Write to Costas Paris at costas.paris@wsj.com

(END) Dow Jones Newswires

September 24, 2016 02:48 ET (06:48 GMT)