Philippines seeking foreign capital to save bankrupt Hanjin shipyard

30, Jan. 2019

MANILA, NNA – The Philippine government is looking for more foreign firms to invest in the shipbuilding industry, a key exporter, in the wake of a bankruptcy of the country’s largest shipyard.

Hanjin Heavy Industries and Construction Philippines Co., a unit of South Korea’s Hanjin Heavy Industries Co., is seeking help from Manila after filing for court protection from its creditors earlier this month.

The government-led rescue is focused on finding foreign investors that can take over the shipyard in the Subic Bay free port zone, a former U.S. naval base, and save what is left of the already depleted workforce.

The company sought government assistance after defaulting on a $400 million debt to five local banks, the biggest corporate bankruptcy in Philippine history. The firm also has an outstanding debt of $900 million owed to South Korean lenders.

Department of Trade and Industry Secretary Ramon Lopez said Monday that foreign shipbuilders had expressed interest in investing in shipbuilding in the Philippines even before Hanjin’s bankruptcy because it is a key sector.

“Entering into shipbuilding will give them now two options: whether to start from zero or to acquire the assets of Hanjin,” he told reporters.

By assuming the liability of about $400 million, an investor is likely to receive “the entire asset of over $1 billion,” he said.

Lopez said three companies were looking into taking over the failed shipyard, but declined to name them.

He added that Chinese, Japanese and South Korean firms are “the more immediate interested parties.”

Lopez said the government is actively asking foreign companies, including those from the U.S., to invest in the country’s shipbuilding industry, calling the Hanjin case an “opportunity.” The Philippines ranks among the world’s top five in the sector dominated by South Korean firms.

Budget Secretary Benjamin Diokno said last week the government would offer assistance to a potential investor in Hanjin’s Philippine unit, according to media reports.

Export-oriented shipbuilding is a major contributor to the Philippine economy. According to an academic study in 2017, it accounted for 2.6 percent of Philippine exports in 2015, while the revenue generated by the shipbuilding and repair industry was estimated at $1.6 billion.

As of 2017, the shipbuilding industry employed 48,000 people, 28,000 of whom were employed by Hanjin. But in December 2018, Hanjin laid off 7,000 workers. Government plans are now in place to help the roughly 20,000 remaining workers.

Two Chinese firms have expressed interest in acquiring Hanjin, which raised alarm over the country’s national security from some government officials, with one senator calling for an inquiry into the matter, reports said.

The Defense Department has suggested a government takeover of Hanjin’s local unit and will monitor companies interested to invest in the shipyard because the area is a major docking and anchorage of the navy’s big warships, according the state-run Philippine News Agency.

The Philippine government has no stake in the company.

Subic Bay is the Philippines’ first free port zone located 100 kilometers northwest of Manila Bay. It covers 679 square kilometers, and was once the largest U.S. military naval base in Asia.