Once-mighty Hanjin Shipping ordered to dismantle

SEOUL – All that remains of stricken Hanjin Shipping Co. will be liquidated, after a court order confirmed the demise of a former giant that helped drive South Korea’s economic rise but has finally succumbed to its ocean of debt.

A Seoul court on Friday pulled the plug on the stricken firm, declaring it bankrupt and ordering the liquidation of a company that has led the country’s shipping industry for the past four decades but became the center of the shipping industry’s largest-ever collapse.

With only a few dozen employees left – compared with when it employed as many as 7,000 as the world’s seventh-biggest shipping company around 2008 – Hanjin has been selling ships, stakes in seaport terminals and other assets since filing for receivership in August last year.

The court closed the company’s rehabilitation proceedings earlier this month, saying liquidation would bring more value to creditors, with its major assets mostly sold off. Hanjin’s stock will be delisted, following the court ruling. The Korea Exchange suspended the stock earlier this month.

A court-appointed caretaker will sell any remaining ships and other assets Hanjin still owns to pay off its creditors, said Choi Ung-young, a judge on the Seoul Central District Court.

A casualty of the flood of excess capacity that has blighted the global shipping industry, Hanjin’s business closure in August last year caused chaos in global supply chains, stranding at one point up to $14 billion in goods as well as ships and crews due to doubts over the company’s ability to pay fees.

The Korea Maritime Institute said, as a result of the Hanjin collapse since August, as many as 12,000 jobs will be lost in the port city of Busan and the southern part of the country, where most of Korea’s shipping facilities are based.

“I still can’t believe Hanjin has gone. I was so proud of being part of the company, so were many of my colleagues there,” said a former Hanjin official who worked at the company for more than 20 years and did not want to be identified. “It was like a second home to me.”

For Korea, the demise of the firm comes as the country’s family-owned conglomerates, known as chaebol, are under scrutiny. Samsung Group, Hyundai Motor Group and Hanjin Group among others have faced accusations of weak corporate governance, a lack of transparency and links to a political corruption scandal.

A unit of the conglomerate that controls Korean Air Lines Co., Hanjin faced a credit crunch after posting a loss each year from 2011 to 2014. It subsequently sought assistance from the government and local creditors. But they rejected it last year, saying the company should have worked out a self-rescue plan.

While Hanjin’s troubles can be traced to the global financial crisis in 2008 and a more recent downturn in trade, some analysts say part of the blame falls on costly long-term ship leases its top managers agreed to when global shipping was booming.

Choi Eun-young, former Hanjin chairwoman who ran the company for seven years, said during a parliamentary hearing in September that she was never prepared to serve at its helm, having been named to the job after the death of her husband, who was the son of the Hanjin group’s founder.

Established in 1977 by Cho Choonghoon, the company, together with local rival Hyundai Merchant Marine Co., moved the bulk of Korean exports and helped drive the country’s “economic miracle.” By last August, Hanjin moved roughly 3% of containers globally and up to 10% of those shipped between Asia and Europe.

The fall of Hanjin leaves domestic rival HMM the dominant player in the country’s maritime transport sector, although it too is struggling.

Chief Executive C.K. Yoo said one of the company’s top priorities is to rebuild trust with its existing and new customers.

“Cargo owners’ trust in Korean operators has been shaken a lot after Hanjin’s collapse,” said Mr. Yoo.

While HMM took over about a third of the cargo handled by Hanjin, the majority of the ill-fated company’s clients have switched to foreign carriers, with bigger rivals such as Maersk Line and Yang Ming Line chartering former Hanjin ships for services on their main routes.

Executives at Maersk Line, the world’s biggest container operator, said recently Hanjin’s bankruptcy and a consolidation in the containershipping sector will pave the way for a better year ahead for the industry.

“Hanjin’s fall has benefited its foreign competitors,” said Cho Bong-ki, a director at the Korea Shipowners’ Association. “The bankruptcy didn’t just kill the company but damaged the reputation of other domestic rivals, with a number of cargo shippers avoiding Korean operators.” (WSJ)