Five Philippine banks have acquired a combined 20-percent equity in shipbuilder Hanjin Heavy Industry Co. (HHIC) Ltd. to recover part of their $412-million credit exposure to the bankrupt Korean firm alongside an upcoming sale of the latter’s vast shipyard in Subic.
John Deveras, head of strategic initiatives at Rizal Commercial Banking Corp., said HHIC’s creditors have agreed on a two-pronged strategy to recover their exposure.
Of the total $412-million exposure of local banks to Hanjin, Deveras said $263 million was tied to the 305-hectare Subic shipyard. The creditors are now in the process of evaluating offers for this facility.
“The parties that have expressed interest are shipbuilding companies and shipbuilding actually requires a lot of technology, requires a supplier ecosystem. It requires knowledge of the different shipping segments, which means you are really attuned to trade flows across the world,” Deveras said.
“I don’t think think there are local groups that have this sort of knowledge. Suffice to say, most of the interest are from foreign shipbuilding groups,” he added.
RCBC has a $145-million credit exposure to Hanjin, the biggest among local banks. Other local creditor-banks and their estimated exposures are: Metropolitan Bank & Trust Co. ($72 million), Bank of the Philippine Islands ($52 million), BDO Unibank ($60 million) and Land Bank of the Philippines ($80 million).
The other method of recovery is through the conversion of debt to shares in HHIC Korea. Of the $412-million loan, Deveras noted that $149 million had been converted to a 20-percent stake in the parent firm, giving the local banks a prospective exit mechanism since HHIC shares are traded in Korea.
The lock-up period for the shares acquired by Philippine banks in exchange for part of their loans will end in December, Deveras said. “Hopefully, share prices go up and we are able to sell so we can recover,” he said.
Meanwhile, Deveras said HHIC’s Korean creditors, including Korea Development Bank, have taken over a 63-percent stake in the company. The creditors can choose to sell individually using the open market, he noted.
Moving forward, he said the next step would be to wait for the offer from the consortium that has expressed interest to acquire the Subic shipyard. Local tycoon Enrique Razon Jr. was not among the prospective buyers, he said.
Asked about concerns on the implication of the facility falling into the hands of Chinese firms, Deveras said: “We are banks. 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 for the banks to transfer the shipyard to.”