Chinese shipbuilder wants to take over Hanjin Subic shipyard

As long as 412 million US dollars can take over one of the world's largest shipyards - Hanjin Heavy Industries Subic Shipyard. This "favorable" condition has attracted many investors, including two Chinese shipyards. However, this has also caused concern and opposition in the Philippines. As the largest shipyard in the Philippines and its strategic position in the South China Sea, it seems a little difficult for Chinese shipyards to win the Subic Shipyard.

Delinquent bank 412 million US dollars, rumored that two Chinese shipping companies intend to take over

On January 8, South Korean shipping company Hanjin Heavy Industries announced that its subsidiary in the Philippines, Hanjin Heavy Industries Subic Shipyard, has applied for a court takeover in the local court. In order to protect the jobs of thousands of shipyard employees after Hanjin Subic filed for bankruptcy, the Philippine government hopes to bring new investors to Hanjin Subic.

Subsequently, it was reported that two Chinese shipping companies intend to take over Hanjin Subic. Ceferino Rodolfo, deputy secretary of the Philippine Department of Trade and Industry (DTI), said recently that two Chinese shipbuilding companies have contacted the Philippine Investment Commission, saying they are interested in taking over the Subic Shipyard.

Rodolfo did not disclose the specific names of the two shipbuilding companies. However, he said that the two Chinese companies, one is a state-owned enterprise, is one of the three major shipbuilding companies in China, and the other is a small-scale private shipbuilding company. Capable of building large ships and also building ro-ro ships. The two shipbuilders will visit the Subic shipyard in January and February respectively.

In addition to Chinese shipbuilding companies, the Philippine government has brought Turkish investors to the Hanjin Subic shipyard last year. About two to three investors visited Subic last year, but Hanjin Subic was worth $2.6 billion at the time, Rodolfo said. The current enterprise value of Hanjin Subic is estimated at $1.6 billion.

Local media in the Philippines pointed out that Hanjin Subic is the largest corporate loan default case in the history of the Philippines. After Hanjin Subic declared bankruptcy, the country's five largest banks scrambled to process loans worth a combined $412 million, most of which were unsecured.

It is understood that Hanjin Subic owes $140 million to RCBC, $80 million to the Land Bank of the Philippines, $72 million to Metropolitan Bank and Trust Co., and $72 million to the Bank of the Philippine Islands. $60 million, owed $60 million to Banco de Oro Universal Bank. The five financial institutions decided to act in unison to control Hanjin Subic and reduce their own losses.

Rodolfo met with Hanjin Subic senior executives on January 9. He said that under the current situation, investors only need to take on the Philippine bank's $412 million in debt to take over the operations of the Subic shipyard, while the Korean headquarters of Hanjin Heavy Industries will be responsible for taking on about $900 million in debt from South Korean creditors. .

In addition, the new investor must cover Hanjin Subic's monthly operating expenses of $12 million to ensure that Hanjin Subic continues its current construction work.

One of the largest shipyards in the world, placing the Philippines among the top five shipbuilding economies in the world

Hanjin Heavy Industries Subic Shipyard was established in Subic, Philippines in 2006. It is the largest shipyard in the Philippines and one of the largest in the world. Hanjin Subic has the world's largest dock with a length and width of 550 meters and 135 meters respectively, and can build two 20,000TEU-class container ships at the same time.

Hanjin Heavy has invested $2.3 billion since taking over the Subic shipyard in 2006. So far, Subic Shipyard has successfully delivered 123 ships, including the world's largest 20,600TEU container ship at the time and the first VLCC built in the Philippines. With Hanjin Subic, the Philippines has also managed to become the fifth largest shipbuilding economy in the world, after China, South Korea, Japan and the European Union.

According to the International Ship Network, Hanjin Subic is the largest investment project in Subic Bay, with total assets of 1.8 trillion won (about 1.6 billion US dollars), accounting for 43.75% of the parent company Hanjin Heavy Industries. However, Hanjin Subic has struggled since 2016 due to a drying up of global orders for new ships and a prolonged slump in the shipbuilding industry. In December, Subic laid off about 7,000 workers, slashing its workforce to around 3,800 — almost a tenth of the roughly 35,000 employees it had at its peak.

Hanjin Subic will continue to lay off staff if it fails to find new investors, the sources said. Currently, Subic shipyard plans to lay off another 3,000 people in the next few months, leaving only about 300 employees to maintain its Subic location. Factory in Kewan.

The local media in the Philippines believe that in addition to external factors such as the slump in the shipbuilding industry and the decrease in new ship orders, the collapse of Hanjin Subic also has its own influence, one of which is the public subsidies and tax breaks and other incentives given by the Philippine government. the end of the measures.

Meanwhile, Hanjin Subic has been hit with regulatory fines over the years for multiple violations of workplace safety standards. Due to the extensive use of local employees and subcontractors, Hanjin Subic has always had great omissions in safety management. In the 12 years since its establishment, the death toll has exceeded 40, and the mortality rate has remained high. It was once called the "Death Shipyard".

Nonetheless, the biggest factor affecting Hanjin Subic's financial position is its tail-heavy payment structure. Shipowners only need to pay 30% of the ship's payment first, and the remaining 70% will be paid when the ship is delivered. Bic had to use loans to shore up its business.

According to the latest data from Clarksons, Hanjin Subic currently has a total of 12 orders with 1.24 million dwt, including 2 VLGCs and 10 Aframax tankers, and the delivery schedule will continue until 2020.

The key area of ​​the Belt and Road was once the largest overseas military base of the United States

Some domestic media and related persons in the Philippines expressed concern about the news that Chinese shipbuilding companies will take over the Hanjin Heavy Industries Subic Shipyard. A former Philippine navy official has warned that a Chinese company's takeover of the Subic shipyard would threaten the country's national security.

Former Philippine Navy Commander Alexander Pama recently claimed on his personal Facebook: "We need to know that the problem with Hanjin Subic is not just a commercial, financial and other economic issue. It is a very important national security issue!"

It is understood that Pama served as the commander of the Philippine Navy from 2011 to 2012, when the sovereignty issue of Huangyan Island was intensified, and the Philippines strongly criticized China's sovereignty claims in the South China Sea. Pama worries that once China enters the Subic shipyard, the shipyard may be used for different purposes in the future.

Pama warned that if China took ownership of Hanjin Subic, it would give it unrestricted access to the Philippines' most geostrategic naval and maritime assets. He said that while Subic Shipyard is a commercial shipyard, there is nothing preventing the owner from turning it into a de facto naval base and marine facility for other security purposes. Therefore, Pama urged the Philippine government and business sector not to let Hanjin Subic fall into the hands of Chinese companies.

It is understood that Subic Bay faces the South China Sea, only 240 kilometers away from Huangyan Island and 1113 kilometers away from Shenzhen. , China's "Belt and Road" key area, with important strategic value.

Subic Bay became an industrial hub after the closure of the U.S. military base in 1992, but naval ships from other countries, including the U.S., still dock there from time to time. The Philippines' largest navy ship is also taking refuge in Subic Bay. Due to its strategic location, the US Navy has chosen the current Subic Bay as a maintenance and supply station.

In addition, Japanese media also believe that the acquisition of Subic Shipyard by Chinese shipyards will expand China's influence in the South China Sea. Nikkei pointed out that if a Chinese company successfully bids to take over the shipyard in Subic Bay, a former US military base, it will mark the growing influence of China in the South China Sea; — Clark Rail Project to expand its presence in Subic Bay.

Some industry experts said that the Chinese shipbuilding industry itself is facing a decline in orders, overcapacity and transformation and upgrading, coupled with Sino-US trade and Sino-US conflicts in the South China Sea, it is not easy for Chinese shipbuilding companies to acquire Subic Shipyard.