Fall­out from Han­jin’s bank­ruptcy

Philippine Daily Inquirer - - BUSINESS -

Hard times lie ahead for more than 30,000 work­ers of Han­jin Heavy In­dus­tries and Con­struc­tion Corp. Philip­pines, the big­gest for­eign in­vestor of Su­bic Bay Freeport.

Un­able to pay its debts, the Philip­pine branch of the erst­while flag­ship of South Ko­rea’s ship­build­ing in­dus­try has filed for re­ha­bil­i­ta­tion at the Olon­gapo City Re­gional Trial Court.

The debtor-ini­ti­ated pe­ti­tion will be re­solved in ac­cor­dance with the Fi­nan­cial Re­ha­bil­i­ta­tion and In­sol­vency Act of 2010 (or Repub­lic Act 10142), which pro­vides an orderly pro­ce­dure for the re­ha­bil­i­ta­tion (if still fea­si­ble) and liq­ui­da­tion (if clo­sure be­comes in­evitable) of busi­nesses that run into se­ri­ous fi­nan­cial trou­ble.

Amid the gloomy re­port about the big­gest cor­po­rate de­fault in Philip­pine busi­ness histo- ry, it is heart­en­ing to note the five do­mes­tic banks that have a com­bined P21-bil­lion loan ex­po­sure in Han­jin have en­tered into a gen­tle­man’s agree­ment not to un­der­take in­di­vid­ual ef­forts to seize its prop­er­ties to sat­isfy their debts.

In the past, when banks got word that a debtor-com­pany was in dan­ger of go­ing un­der, they scram­bled to lay their hands on what­ever as­sets were within reach to min­i­mize their losses.

Although this ap­proach made good busi­ness sense from the bank’s per­spec­tive, it of­ten re­sulted in the clo­sure and liq­ui­da­tion of the com­pany.

Thus, the banks not only lost the op­por­tu­nity to be pro­por­tion­ally paid, they also found them­selves pay­ing huge le­gal fees for re­cov­er­ing prop­er­ties that were hardly worth the money shelled out to ac­quire them.

The fil­ing of the bank­ruptcy pe­ti­tion, how­ever, does not pre­clude the banks from ex­plor­ing other means to help Han­jin get out of its fi­nan­cial fix. The law gives the af­fected stake­hold­ers of busi­nesses that file for re­ha­bil­i­ta­tion ev­ery op­por­tu­nity to re­solve the prob­lem out of court.

For one, the banks can help in the search for a “white knight” that has the re­sources to set­tle Han­jin’s un­paid debts and, at the same time, pro­vide the cap­i­tal needed to make it an op­er­at­ing con­cern again.

Ex­pect that sav­ior though, as a pre­con­di­tion for its takeover, to pres­sure the banks into agree­ing to ac­cept hair­cuts in their ex­po­sures, ex­tend credit as­sis­tance at low in­ter­est rates, de­fer the col­lec­tion of loan pay­ments, or a com­bi­na­tion of the above.

As in most bank­ruptcy cases, the fate of the re­main­ing or soon to be dis­placed Han­jin em­ploy­ees would hang in the bal­ance.

As­sum­ing the re­ha­bil­i­ta­tion pe­ti­tion pushes through and a re­ha­bil­i­ta­tion re­ceiver is ap­pointed by the court, or a white knight comes along, the em­ploy­ment sta­tus of those work­ers would be a bone of con­tention.

Who among them will be re­tained and who will be laid off? If there is an ex­ist­ing col­lec­tive bar­gain­ing agree­ment, will the new owner honor it in full or de­mand that some of its eco­nomic pro­vi­sions be amended to re­duce the com­pany’s op­er­a­tional ex­penses?

The sanc­tity of em­ploy­ment con­tracts ear­lier en­tered into by Han­jin would be se­verely tested.

In sim­i­lar in­stances in the past, the af­fected em­ploy­ees, or their rep­re­sen­ta­tive, were rarely given a seat at the dis­cus­sion ta­ble. Their fate was of­ten left to the con­science or good­ness of the peo­ple tasked with find­ing a so­lu­tion to the bank­ruptcy prob­lem.

If at all, the em­ploy­ees’ in­ter­ests were dis­cussed in con­junc- tion with the prepa­ra­tion of the com­pany’s profit and loss state­ment or other fi­nan­cial doc­u­ments for the ben­e­fit of the court or the white knight.

They were just a num­ber. The hu­man el­e­ment was rarely given the recog­ni­tion and con­sid­er­a­tion it right­fully de­serves.

Han­jin’s bank­ruptcy should not be looked at sim­ply as a fi­nan­cial is­sue that is bet­ter left to the court or the cred­i­tors to de­cide.

The Han­jin em­ploy­ees de­serve the same level of con­cern and care that the gov­ern­ment has shown in han­dling the fi­nan­cial prob­lems of dis­placed over­seas Filipino work­ers.

COR­PO­RATE & SE­CU­RI­TIES INFO RAUL J. PALABRICA

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