SEOUL, Aug. 31 (Xinhua) -- Hanjin Shipping, South Korea's biggest shipping line, on Wednesday filed for court receivership after its creditors refused to provide additional financial support to the debt-ridden company.
The court filing came after the board of Hanjin decided unanimously to apply for receivership at a meeting earlier in the day, according to Yonhap news agency report.
The state-run Korea Development Bank (KDB), Hanjin's main creditor, said Tuesday that the shipper's restructuring plan was not enough to survive amid an industry-wide slump, caused by falling global trade.
Hanjin entered a voluntary debt-rescheduling plan in May to resolve its cash shortage, which creditors had expected to increase to as much as 1.3 trillion won (1.2 billion U.S. dollars). The troubled shipper submitted a new restructuring plan to creditors, which unanimously viewed as insufficient.
The South Korean shipping industry has been grappling with a prolonged downturn in global trade that led to overcapacity and lower freight rates. Charter rates on leased vessels were fixed at a high level, increasing operating costs amid falling revenue.
Hanjin, the world's seventh-largest container shipping line by capacity, reported a loss of 474.1 billion won (425 million U.S. dollars) in the January-June period, turning into the red from a 103.3 billion won profit a year earlier. The company posted losses for four of the past five years.
Falling orders along with continued losses resulted in an increase in debts. Hanjin had a total debt of 6.1 trillion won as of end-June.
Hanjin shares were suspended on Tuesday after plunging almost 30 percent in Seoul trading. The shipping line is affiliated with Hanjin Group, the 10th-largest South Korean conglomerate that operates the Korean Air Lines.
Finance Minister Yoo Il-ho told a meeting with economy-related ministers that Hanjin's entrance into receivership would have a limited impact on the financial market and banks' financial healthiness as most of losses were realized in advance.
Yoo said the court receivership was in line with the government's principle that there will be no further funding to debt-ridden companies if they fail to resolve liquidity shortage with their own efforts to survive.
The South Korean government has led a restructuring in troubled shipbuilding and shipping industries, which were hit hardest by the protracted slump in global trade.
Major shipbuilders, including Hyundai Heavy Industry, Samsung Heavy Industry and Daewoo Shipbuilding & Marine Engineering, had submitted a reorganization plan to the government, pledging to cut jobs by 30 percent and reduce capacity by 20 percent by the end of 2018.
Meanwhile, the country's financial regulator said it will encourage Hyundai Merchant Marine, the second-biggest container shipping line, to take over Hanjin's profitable, core assets to prevent the weakening of the country's competitiveness in the shipping sector.
Financial Services Commission (FSC) said it will push a plan to make Hyundai Merchant acquire Hanjin's assets such as vessels, business network and core staff that can contribute to making profits. Hanjin allegedly owns about 60 ships and leases some 70 vessels.
Shares of Hyundai Merchant surged 26 percent, after adding 7.5 percent in the previous day.
Hyundai Merchant also has been under a creditor-led restructuring plan, but it succeeded in getting the funding from creditors by selling its brokerage unit, Hyundai Securities, and agreeing on lower charter rates with ship leasers.
