Hard times lie ahead for more than 30,000 workers of Hanjin Heavy Industries and Construction Corp. Philippines, the biggest foreign investor of Subic Bay Freeport.
Unable to pay its debts, the Philippine branch of the erstwhile flagship of South Korea’s shipbuilding industry has filed for rehabilitation at the Olongapo City Regional Trial Court.
The debtor-initiated petition will be resolved in accordance with the Financial Rehabilitation and Insolvency Act of 2010 (or Republic Act 10142), which provides an orderly procedure for the rehabilitation (if still feasible) and liquidation (if closure becomes inevitable) of businesses that run into serious financial trouble.
Amid the gloomy report about the biggest corporate default in Philippine business history, it is heartening to note the five domestic banks that have a combined P21-billion loan exposure in Hanjin have entered into a gentleman’s agreement not to undertake individual efforts to seize its properties to satisfy their debts.
In the past, when banks got word that a debtor-company was in danger of going under, they scrambled to lay their hands on whatever assets were within reach to minimize their losses.
Although this approach made good business sense from the bank’s perspective, it often resulted in the closure and liquidation of the company.
Thus, the banks not only lost the opportunity to be proportionally paid, they also found themselves paying huge legal fees for recovering properties that were hardly worth the money shelled out to acquire them.
The filing of the bankruptcy petition, however, does not preclude the banks from exploring other means to help Hanjin get out of its financial fix. The law gives the affected stakeholders of businesses that file for rehabilitation every opportunity to resolve the problem out of court.
For one, the banks can help in the search for a “white knight” that has the resources to settle Hanjin’s unpaid debts and, at the same time, provide the capital needed to make it an operating concern again.
Expect that savior though, as a precondition for its takeover, to pressure the banks into agreeing to accept haircuts in their exposures, extend credit assistance at low interest rates, defer the collection of loan payments, or a combination of the above.
As in most bankruptcy cases, the fate of the remaining or soon to be displaced Hanjin employees would hang in the balance.
Assuming the rehabilitation petition pushes through and a rehabilitation receiver is appointed by the court, or a white knight comes along, the employment status of those workers would be a bone of contention.
Who among them will be retained and who will be laid off? If there is an existing collective bargaining agreement, will the new owner honor it in full or demand that some of its economic provisions be amended to reduce the company’s operational expenses?
The sanctity of employment contracts earlier entered into by Hanjin would be severely tested.
In similar instances in the past, the affected employees, or their representative, were rarely given a seat at the discussion table. Their fate was often left to the conscience or goodness of the people tasked with finding a solution to the bankruptcy problem.
If at all, the employees’ interests were discussed in conjunction with the preparation of the company’s profit and loss statement or other financial documents for the benefit of the court or the white knight.
They were just a number. The human element was rarely given the recognition and consideration it rightfully deserves.
Hanjin’s bankruptcy should not be looked at simply as a financial issue that is better left to the court or the creditors to decide.
The Hanjin employees deserve the same level of concern and care that the government has shown in handling the financial problems of displaced overseas Filipino workers.