HANJIN Shipping, South Korea's biggest container shipping line, decided to apply for court receivership after lenders ended all support, reports Bloomberg News.
The board of Hanjin voted unanimously to file for court receivership at a meeting in Seoul Wednesday, a spokesman said, according to Reuters.
The bankruptcy of the world's seventh biggest container carrier, would be the largest ever according to Paris consultancy Alphaliner, exceeding the 1986 collapse States Lines.
Shares of Hyundai Merchant Marine surged after the financial regulator said the rival may consider buying parts of the company in distress, said the report.
"It means one less competitor but it really won't change the fundamental problem the industry is facing," said Park Moo Hyun, an analyst at Hana Financial Investment in Seoul.
"There will still be the same number of ships. What we really need is a way to cut down on capacity."
Hyundai Merchant Marine, the nation's second-biggest container line, is in the midst of a creditor-led debt restructuring programme. Unlike Hanjin Shipping, it has managed to obtain financial help after meeting all requirements for funds.
The state-run Korea Development Bank is now the biggest shareholder of Hyundai Merchant after swapping debt for equity. KDB owns about 14 per cent of the company, according to data compiled by Bloomberg.
The restructuring proposals submitted by Hanjin Shipping weren't enough to address a cash shortage, main lender Korea Development Bank said Tuesday, dealing a blow to the revival efforts by a firm that's been trying to reschedule debt under a voluntary creditor-led programme since May.
South Korea's shipbuilders and shipping firms, which underpinned decades of economic growth, are reeling under debt after racking up losses amid a downturn caused by overcapacity and sluggish trade, forcing state banks to pick winners, Reuters reported.
Hanjin's lead creditor, state-run Korea Development Bank (KDB), said on Tuesday inadequate financial support from parent Hanjin Group to an ongoing debt restructuring plan forced creditor banks to pull the plug.
Source : HKSG.