Korea Line Signs $31.5 Million Deal to Buy Some Hanjin Assets

Acquisition marks bulk carrier’s entry into container shipping

A Hanjin container ship anchored near Long Beach, Calif. A Seoul court gave Korea Line the first right to purchase five Hanjin vessels, as well as Hanjin’s stake in the terminal at Long Beach. However these assets are so far not included in the Korea Line deal.

SEOUL—Shipping operator Korea Line Corp. signed a 37 billion won ($31.5 million) deal on Tuesday to acquire some assets of bankrupt Hanjin Shipping Co., the collapse of which stranded billions of dollars in cargo at sea in late August, disrupting supply chains world-wide.

The acquisition of the Hanjin assets will mark the entry of Korea Line into container shipping. Korea Line, a bulk carrier owned by the construction-focused Samra Midas Group, is expanding its business after exiting from bankruptcy protection which it filed for in 2011 amid a slump in dry-bulk shipping rates.

Under the deal, Korea Line will take over the business network and client information of Hanjin’s Asia-U.S. route, subsidiaries in seven countries including the U.S., China and Vietnam, and 574 workers based in Korea and overseas, according to its regulatory filing.

The asset sale will be completed on Jan. 5, it said.

In a surprise decision, a Seoul court last week chose Korea Line over Hyundai Merchant Marine Co. as the preferred buyer of the Hanjin assets, contrary to market expectations.

The court gave Korea Line the first right to purchase five container ships owned by Hanjin that can move 6,500 containers each, as well as Hanjin’s 54% stake in Total Terminals International LLC, which runs Long Beach Terminal in California.

Mediterranean Shipping Co., the world’s second-largest shipping line by capacity, owns the remaining stake in Total Terminals.

However, Korea Line said Tuesday that its deal doesn’t involve the five Hanjin ships or Hanjin’s stake in the California terminal—assets deemed valuable for the newcomer to compete with bigger rivals on the trans-Pacific route.

A Korea Line spokesman said the company will have further talks with Hanjin over the five vessels and the terminal until Jan. 5, when its first right to those assets expires.

The spokesman said that the purchase of the five vessels and the terminal stake was optional, and the company wants to have more time to look into the assets before making a decision. Some analysts say Korea Line may not have enough money to buy them. The Korea Line official denies it.

“Korea Line may give up if the price tag is too high. Instead, it can charter container ships from other operators,” said Kim Seung-churl, a Meritz Securities analyst.

Mediterranean Shipping, which has the right of pre-emption to Hanjin’s stake in the terminal, is in discussions to sell the terminal’s operations to Hyundai Merchant.

The Korea Line deal heralds the beginning of the end for Hanjin, which filed for receivership Aug. 31. Once the world’s seventh-largest container operator by capacity, the company is under court order to cut its workforce and dispose of assets such as ships and terminals.

Many brokers expect Hanjin eventually to be liquidated or reduced to a much smaller regional operator.

Source: Wall Street Journal (SSU)

Source: Wall Street Journal