[Yonhap News Photo]
The former chairwoman of South Korea's largest container carrier Hanjin Shipping appeared in court Tuesday for an investigation to determine the validity of a warrant sought by prosecutors on charges of using insider information to sell stocks.
Prosecutors have investigated Eusu Holdings chairwoman Choi Eun-yeong and her two daughters who had sold their holdings in Hanjin Shipping illegally to avoid losses.
In March, Hanjin Shipping, a subsidiary of the Hanjin Group controlled by Cho Yang-ho who also heads South Korea's top carrier Korean Air was put under creditor-led restructuring to roll over its maturing debt.
Cho's younger brother had run the shipping company until he died in 2006 and then his wife managed it. In 2014, Korean Air acquired a controlling 33.2 percent stake in Hanjin Shipping. Choi has headed Eusu Holdings since it was separated from the parent group in May 2015.
Like other tycoons who control their family-run conglomerates through a complex web of cross-shareholdings, the Cho family controls 29.8 percent in Hanjin KAL, the group's holding company, which has 31.46 percent in Korean Air.
Cho has offered to abandon managerial control of the shipping unit as he was tied up with his work to reform Korean Air and other group units.
Hanjin Shipping, the world's ninth container carrier in terms of capacity, has been reeling under a credit crunch aggravated by snowballing debts and falling freight rates.
To receive a new bailout from creditors, the company is under pressure to step up the sale of non-core assets, lower chartered ship fees and extend the maturity of loans held by non-banking institutions.
Korean Air has seen its financial woes aggravated by the continued injection of liquidity into the shipping unit, with its debt ratio standing at more than 930 percent.
Anxiety is growing among Korean Air's shareholders because Hanjin Shipping has sucked nearly one trillion won from the airliner. However, creditors are adamant that they will not extend fresh loans to Hanjin Shipping until Cho presents a complete rehabilitation program.
With its debt estimated at 5.6 trillion won, the shipping unit needs at least one trillion won in its short-term liquidity to cover arrears in payment to chartered ship owners as well as operational funds.
For its long-term survival under the supervision of creditors, Hanjin Shipping should seek a quick settlement in negotiations with the owners of 58 chartered vessels. One vessel has already been impounded in South Africa for unpaid charter fees.
Market watchers suggest Cho may have to donate his personal wealth or secure money through Korean Air's capital increase that would disappoint shareholders.
On Tuesday, Cho handed over his holding in Jungseok Enterprise for 25 billion won to the group's leasing service unit. The proceeds will be used to participate in the capital increase of Hanjin KAL.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
