By Jonas Reyes
SUBIC BAY FREEPORT – Hanjin Heavy Industries and Construction Co., the Philippine affiliate of South Korean shipbuilding giant, has filed for voluntary rehabilitation citing heavy financial losses.
In an announcement issued Tuesday, Hanjin said it filed for rehabilitation at the Olongapo City Regional Trial Court.
The company noted a decline in orders that stemmed from the global financial crisis in 2008. That year, the supply of ships exceeded the demand, making orders for new ships dwindle.
The Olongapo court will decide within 120 days whether to allow Hanjin to pull up stakes from the Freeport or proceed with rehabilitation under court receivership.
Subic Bay Metropolitan Authority (SBMA) Chairman Wilma T. Eisma said she was saddened to learn that Korean shipbuilder is facing serious financial trouble. Hanjin officials, Eisma said, had revealed that the company owes some $400 million in outstanding loans from Philippine banks on top of another $900 million in debts with lenders in South Korea.
Eisma said she was informed that the company still has six pending multi-million new building projects at its Redondo Peninsula shipyard here, and that these may have to be cancelled if a rehabilitation plan does not materialize.
“The bottom line is that the company said it does not have enough cash to repay its loans, and that it cannot continue with its operations under these circumstances,” Eisma said.
“It’s really sad that Hanjin would be in dire financial straits after successfully building some of the world’s biggest ships here and putting the Philippines in the map as the world’s fifth largest shipbuilder,” she added.
Hanjin’s local affiliate, which has focused in building high-value vessels, was established in 2006 as a subsidiary of Hanjin Heavy Industries & Construction Co., Ltd., a multi-national company that provides shipbuilding, construction, and plant services in South Korea and internationally.
After frenzied construction of its 300-hectare shipyard began in May 2006, it rolled out its first ship, the “Argolikos,” in July 2008.
With some $2.3 billion in foreign direct investments here, the firm proceeded to manufacture some of the world’s biggest cargo and container ships, bulk carriers, liquefied petroleum gas carriers, very large crude oil carriers (VLCC) and very large ore carriers (VLOC).
According to company records, Hanjin has delivered since 2008 a total of 123 vessels to valued clients across the globe, thus cementing its foothold in the highly competitive shipbuilding market.
In the course of its operation, the Korean firm also became the biggest employer among all registered businesses in the Subic Bay Freeport Zone with some 30,000 employees at peak season, and was recognized by both the Philippine Exporter Foundation (Philexport) and the Department of Trade and Industry (DTI) as top export performer.
But liquidity problems forced Hanjin to lay off more than 7,000 workers last December, Eisma said. The firm is about to lay off another 3,000 early this year until just about 300 local workers and as few as seven Korean supervisors would remain in March to do facility maintenance, she added.
“The SBMA, of course, expressed its concern about the separation of shipyard workers, but we received assurances that those who were laid off were amply compensated. Still, we’re having this aspect checked out,” Eisma said.
She added that the SBMA is now working with Hanjin officials to find some way to keep the shipbuilder, which has helped build Subic’s huge reputation in the global maritime industry.
“I really hope that Hanin’s creditors would agree to some rehabilitation plan, or that the company would find some financial partner to continue with its shipbuilding operations in Subic,” Eisma said.