Bank creditors convert Hanjin exposure to equity

by Mary Grace Padin (The Philippine Star), Jun 26, 2019

MANILA, Philippines — Philippine banks have converted part of their loan exposure to Hanjin Heavy Industries & Construction Philippines Inc. (HHIC-Phil) into shares in the shipbuilder’s parent company in South Korea, according to Rizal Commercial and Banking Corp. (RCBC).

In a press briefing, RCBC senior executive vice president John Thomas Deveras said concerned Philippine creditors have transferred $149 million out of their $412 million loan exposure to get a 20-percent stake in South Korean firm Hanjin Heavy Industries & Construction Co. Ltd.

Deveras said the conversion is part of the two-pronged approach that Philippine banks are exploring in order to recover their loan exposure to Hanjin.

“Of the $412 million exposure, $149 million has been converted into a 20-percent stake in Hanjin Korea. So when the shares of the Philippine banks are unlocked by December, hopefully the share price goes up…so that we’re able to recover the $149 million,” the bank official said.

The other part of the plan, he said, is to sell Hanjin’s shipyard facility in Subic to interested firms.

“About $263 million of that exposure is tied to the Subic shipyard. So we are in the process now of evaluating interest to buy the Subic shipyard from the banks,” Deveras said. “Essentially we’re waiting for an offer from a consortium to acquire the shipyard from us.”

According to the RCBC official, the exposed banks would seek the approval of the Philippine government with regards to the buyer of the shipbuilding yard.

“We’re approaching this as a commercial transaction. But because there are geopolitical angles to this deal, of course, the government has the final say on who they will agree the banks will transfer the shipyards to,” Denveras said.

Last January, HHIC filed a petition for rehabilitation at the Olongapo City Regional Trial Court.

The country’s largest banks BDO Unibank, Metropolitan Bank & Trust Co., Land Bank of the Philippines, Bank of the Philippine Islands, and RCBC have a combined exposure of more than P21 billion in HHIC. This is on top of another $900 million in debt with lenders in South Korea.

Despite Hanjin’s failure to settle its obligations to the banks, the Bangko Sentral ng Pilipinas (BSP) assured that it would have minimal impact on the banking industry, as they are well-capitalized.

The government is helping find a white knight for Hanjin, the biggest foreign investor at the Subic Bay Freeport given the impact of its closure on employment.

According to the Department of Trade and Industry, foreign groups have already expressed interest in possibly taking over Hanjin’s shipyard facility.