Shipping restructuring specialists speaking at the Capital Link New York Maritime Forum on 13 September predicted that Hanjin Shipping will ultimately be liquidated, not rehabilitated. “Clearly, it’s not ‘too big to fail’, because the Korean government did not want to pump capital into what could be considered a mismanaged company for a very long period of time,” said Deloitte managing director Robert Frezza. “It was a very big signal to the rest of the industry.”

Frezza predicted that an “orderly liquidation” will be attempted for Hanjin, “which will probably lead to some other bankruptcies in the near term”. Frezza does not believe the Korean government will save Hanjin Shipping and referred to recent cash injections by major shareholders as “too little, too late. We don’t see other parties rushing in to create a consortium to help and we don’t believe the Korean government will be part of any kind of bailout,” said Frezza. “Honestly, given where the company is today, I think it’s virtually impossible to restart, in terms of confidence and everything else – it’s kind of done,” said AMA Capital Partners president Paul Leand.

Hanjin’s Chapter 15 bankruptcy filing in the United States will protect the company’s ships from arrest in American waters during cargo unloading, but that protection does not extend to non-US ports. According to Leand, “There is a commitment to at least try to get these cargoes off, but unfortunately, what happens after that [outside the United States] is that every single one of these ships will be susceptible to maritime liens for bunkers, crew, and everything else. This company did not file in the US [as a primary Chapter 11 proceeding that provides global protection]. It filed in Korea and there is no global stay [under Korean bankruptcy law] that can be imposed, so nature will take its course in terms of the maritime process,” said Leand.

Miller Buckfire managing director Kevin Haggard also predicted that Hanjin will not be rehabilitated. “If the Korean government was going to invest [in Hanjin’s rescue], it would have done so by now. It looks more likely to me that it may just be liquidated and the assets will get absorbed into the market,” said Haggard. If so, there will be broad fallout. Leand warned, “When you release over 80 ships into the market – and I don’t think it will take all that long for those ships to get into the market – it’s going to have an overall negative impact. A lot of these ships are chartered-in and those are the companies that are going to take it on the chin first. But beyond that, any companies that have charter rate options or extensions that are coming up in the next 18–24 months are going to have to be paying attention as this tonnage comes in,” said Leand.

Yet another argument against rehabilitating Hanjin is that its owned fleet is simply not high-quality enough, according to Leand. He pointed out that ship design and fuel-efficiency advances have had a major impact in the container sector, unlike in other shipping sectors where ‘eco ships’ have not met expectations. “When you look at the [Hanjin] fleet, it’s just not that great of a fleet,” opined Leand. “That’s going to be one of the challenges of redeploying those assets. At a price, you can make up for those fuel differentials, particularly in today’s oil price environment. But if the oil price starts to come back and bunker prices start to come back, what you’re going to find is that a lot of those ships are not very favourable in the market. Also, they have a whole group of ships in the 5,000 teu range, which the market doesn’t seem to care about. “Those ships will have to be absorbed and they will get absorbed,” said Leand. “At some price, they will trade. But in the medium term, this is just going to put more supply into the sector, which is not what anybody needs right now.”