Philippine banks seek to collect millions from downturn-hit Hanjin

ABS-CBN News

Posted at Jan 11 2019 12:32 PM | Updated as of Jan 11 2019 09:53 PM

A Hanjin Shipping Co. ship is seen stranded outside the Port of Long Beach, California, US. The Korean's shipbuilding unit in the Philippines has sought court-assisted rehabilitation to pay some $412 million in debt. Lucy Nicholson, Reuters

MANILA -- Philippine banks are moving to collect some $412 million in debt from Hanjin, as the Korean shipbuilder that is hit by a slowdown in global demand sought court-assisted rehabilitation, officials said Friday.

The country's largest lender BDO Unibank along with Bank of the Philippine Islands and Rizal Commercial Banking Corp confirmed loan exposures to Subic Bay-based Hanjin. The Philippine Daily Inquirer, which first reported on the debt, identified Metrobank and LandBank of the Philippines as among 5 creditors.

Hanjin, which employs 3,000 people at its shipyard north of Manila, has $2.3 billion in assets and the rehabilitation filing was a "proactive move" to avoid default, said Subic Bay Metropolitan Authority administrator Wilma Eisma.

The Bangko Sentral ng Pilipinas said Hanjin's $412 million in loans accounted for just 0.24 percent of the Philippines' total gross loans or 2.48 percent of FCDU or foreign currency deposit unit loans.

Hanjin's debt woes will not adversely affect Philippine banks, BSP Deputy Governors and officers in charge Chuchi Fonacier and Diwa Guinigundo said in separate interviews on ANC.

Shares of BDO, BPI, RCBC and Metrobank fell on Friday along with the entire financial sub-sector. The Philippine Stock Exchange Index was down 1.38 percent at noon.

Watch more in iWant or TFC.tv

"Malaki po ang assets, wala lang pong cash," Eisma told DZMM.

(They have huge assets, just not enough cash.)

"They are very forward-looking and they are very responsible. Ayaw nila maghintay na magde-default sila kaya maaga pa lang, they want to come to the table with all the banks and with the help of the court, magkaroon ng usapin paano nila unti-unti pang mababayaran ang pagkaka-utang nila," she said.

(They are very forward-looking and they are very responsible. They don't want to wait for a default that's why this early, they want to come to the table with all the banks and with the help of the court, open discussions on how they can pay their debt.)

Eisma clarified that Hanjin had not defaulted on loan or interest payments and it was still considered an "investor of good standing." The company is not saddled with its parent's debts, she said.

In 2016, Hanjin Group approved a 60 billion won ($55 million) bailout plan for its shipping business. At that time, Hanjin Shipping had about 6 trillion won ($5.4 billion) in debt.

COLLECTIVE ACTION

Hanjin's creditors are looking at "all kinds of alternatives," including talking to strategic investors, BPI president Cezar Consing told ANC's Market Edge.

The banks are "in close contact with one another" and a resolution could be reached in a "few months."

"I think we will be alright. We're actually talking about all kinds of alternatives now. It will be premature to be talk about specifics," he said.

BDO president Nestor Tan said the country's largest bank "more than adequately provided for potential losses."

RCBC said its exposure was "very manageable and the borrowing company's business is actually very attractive with a lot of potential."

Watch more in iWant or TFC.tv

Acting as one, even if the Hanjin borrowings were negotiated separately, will be the "best move" for the creditors, Fonacier told Early Edition.

They will be taking action collectively as a group of creditors.

"We are aware of this. We are monitoring. There is no cause for worry," Fonacier said.

Watch more in iWant or TFC.tv

FALLOUT BEYOND BANKS

"Well-capitalized" and with a non-performing loan ratio of "less than 2 percent," the effects of a possible default on banks will be "very very negligible," Guinigundo told Market Edge.

There could be a "knee-jerk reaction" but the Hanjin case is not a "systemic issue," he said.

Guinigundo said authorities are monitoring the effects on sectors outside banks, such as Hanjin's suppliers.

"What we need to do is stay on the ground and determine the actual extent of the exposure," he said.

"There could be some exposure to suppliers and these are not banks. These are things that we need to understand," he said.

There was no immediate statement from Hanjin as of noon Friday. Representatives from the trade and labor departments met recently with company officials in Subic, according to SBMA's Eisma.

She said Hanjin cited a "downturn" in global shipping for its woes. The company builds ships with 6,000-container capacity and those that could carry liquefied petroleum gas and liquefied natural gas.

At the peak of demand in 2014 and 2015, Hanjin employed up to 33,000 people, she said. Former Hanjin workers are "very highly employable" because of their training, she said.

"Based sa pag-uusap namin, nangyari ito dahil sa worldwide downturn sa shipping industry. This is something because of supply and demand," she said.

(Based on our discussions, this is happening because of the worldwide downturn in the shipping industry. This is something because of supply and demand.)

EARNINGS HIT

Watch more in iWant or TFC.tv

Hanjin's creditor banks in the Philippines risk a hit in their earnings this year if they failed to provision for a possible default by the Korean shipbuilder.

RCBC has the "biggest exposure" to Hanjin and could report a loss "at worst" if the entire debt is unpaid, said China Bank Securities research director Garie Ouano.

"If it does affect earnings, it's likely gonna be seen as a one-off," Ouano told ANC's Market Edge.

"Fundamentally, the banks are still strong. There's no clear evidence that the bankruptcy of Hanjin is a systemic problem so there's really no reason to be bearish on the sector for the long term," he said.

The financials sector on Friday closed 2.54 percent lower compared to a 1.02-percent decline in the main index.

RCBC was down 9.12 percent, BPI fell 4.76 percent while Metrobank shed 4.82 percent. BDO closed unchanged.

-- reports from Cathy Yang, Michelle Ong and Bruce Rodriguez, ABS-CBN News