South Korean shipping giant Hanjin has been declared bankrupt by a court, after racking up more than $4 billion worth of debts.
The company became overwhelmed by the $5.4 billion (£4.1 billion) debt back in August 2016 after failing to raise any more capital from its creditors. Hanjin has since been forced into receivership and subsequently applied for court protection.
The Seoul Central District Court commented on the ruling:
“The court will, through the bankruptcy process, make efforts so the maximum of debt repayment will be conducted in a way that is fair and balanced to the creditors.”
The shipping industry as a whole has been struggling of late due to a downturn in a general economic environment. Overcapacity which has led to debt accumulation for several large firms, but as the former seven-largest shipping company in the world the fall of Hanjin has been the most substantial blow to the industry thus far.
Earlier in the month, Maersk announced a $1.9 bilion net loss for the year – its second loss since the second world war. After news of Hanjin’s liquidation broke, Maersk (CPH:MAERSK-B) shares saw modest losses of 1.88 percent as 11.00AM (GMT).
Hanjin’s ongoing unresolved financial difficulties proved problematic after billions of pounds worth of cargo ultimately had to be left effectively stranded at sea, after ports refused to give entry or subsequently impounded docked ships, causing chaos.
Lars Jensen of Sea Intelligence Consulting commented to the BBC on the ramifications of the liquidation of the company and the future difficulties for the industry. He said:
“Everyone will be seen to have had a hard time in 2016.”
“2016 was the bottom of the market, but the climb upwards towards a more balanced market will take two to three years to fully accomplish,” He added.
Following the court decision, assets of Hanjin are set to oversee the liquidation process that follows, with remaining assets being offloaded and funds given to creditors to cover any outstanding debts. The first official meeting between creditors is set to take place on June the 1st.