Seaspan Corp, a container ship-leasing company, said it won’t accept Hanjin Shipping Co’s request for a cut in charter rates by about 30%, dealing a blow to efforts by South Korea’s biggest liner to revamp debt amid a prolonged trade slump.
The Hong Kong-based ship lessor could instead consider ordering new, fuel-efficient vessels from a South Korean shipyard and leasing them to Hanjin Shipping, helping improve the liner’s competitiveness, said Gerry Wang, Seaspan’s chief executive officer. Hanjin Shipping operates seven container vessels leased from Seaspan.
“We do not accept any rate cut,” Wang said in a phone interview on Thursday. “We have never done it. We won’t tolerate a contract re-negotiation. Any call for rate cut is illegal by international laws.”
Hanjin Shipping is in talks with shipowners to reduce charter fees as part of a requirement by creditors in exchange for funds to improve its financials. The South Korean government is reviewing various measures, including possible mergers, to revive an industry struggling with mounting debt after years of losses from weak demand.
Hanjin Shipping is having “continuous discussion with Seaspan” and making all “effort to bring the best visible result as soon as possible,” the Korean company said in an e-mailed response to a request for comment.
The Seoul-based company is in talks to lower fees for 60 container and bulk ships it has leased from 22 owners by some 30% for a period of about three-and-a-half years, the South Korean company said in a June 14 regulatory filing. Hanjin Shipping is also meeting with its bondholders to persuade them to take part in the restructuring plan led by the creditor banks.
“This increases the uncertainties of the restructuring plan,” said Park Moo Hyun, an analyst at Hana Daetoo Securities Co in Seoul. “Fundamentally, Hanjin Shipping needs more efficient vessels if it really wants to remain competitive.”
Wang said he met with Hanjin Group chairman Cho Yang Ho this week. Discussions centred around a long-term solution for the shipping company, which is to have a modern fleet that will be cost-efficient, Wang said. Seaspan has ordered container ships from South Korean shipyards, including Hyundai Heavy Industries Co and Samsung Heavy Industries Co, worth a combined $8bn.
“We lived up to all the contractual obligations 100%,” even during the difficult times through the global financial crisis, Wang said, referring to the shipbuilding orders placed with South Korean shipyards.
Hyundai Merchant Marine Co, the country’s second-biggest container liner, reached agreements to cut charter rates for three and a half years in exchange for new shares and debt for the adjustment.
Hanjin Shipping has been unprofitable in four of the past five years. The company’s cash on hand fell 56% from a year earlier to 241bn won ($206mn) at the end of last year, according to data compiled by Bloomberg.
South Korea has been taking more active steps to help its shipping businesses cut debt and weather the slump that has led some cargo carriers to report losses or smaller profits. Worldwide, shipping companies have been shrinking their workforce and exploring consolidation after years of overcapacity depressed freight rates.
Seaspan currently has an operating fleet of 89 vessels, according to its website. It’s customers include Maersk Line, Hapag-Lloyd and Cosco Container Lines.
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