Several options, including government takeover, are being considered by the Philippine government to help ailing shipbuilder Hanjin Heavy Industries and Construction-Philippines, Inc. (HHIC-PHIL), which was recently placed under rehabilitation due to its huge financial obligations.
Defense Secretary Delfin Lorenzana, in a Senate hearing on January 17, said President Rodrigo Duterte is “very receptive” to the idea of government taking over and managing HHIC-PHIL so the government can build its own vessels.
Another option being considered is to open the shipbuilder for acquisition by other companies from the US, Japan, South Korea, and Australia.
“We talked about that with the economic managers with the President. There are several proposals like opening it to other countries as well… if they want to take over,” Lorenzana said in a separate media interview.
Several lawmakers also suggested several options, such as opening the company to private local investors and the government taking a majority stake in a private minority directly involved in the operations of the shipyard.
Bangko Sentral ng Pilipinas deputy governor Diwa Guinigundo, meanwhile, in a separate interview, said that based on initial information, it will take eight years—three years’ grace period and five years to repay the obligations—to rehabilitate HHIC-PHIL.
“To the extent that you have a market and the facility continues to operate, then the issue of cash flow will be addressed,” Guinigundo said.
HHIC-PHIL has recently been placed under rehabilitation by the Regional Trial Court (RTC) of Olongapo City after the shipbuilder on January 8 filed a petition for voluntary rehabilitation under Republic Act No. 10142, or An Act Providing for the Rehabilitation or Liquidation of Financially Distressed Enterprises and Individuals, citing financial obligations to Philippine and Korean lenders.
Olongapo RTC Branch 72 judge Richard A. Paradeza in a four-page commencement order issued on January 14 declared HHIC-PHIL under rehabilitation and appointed Stefani Saño as the rehabilitation receiver.
HHIC-PHIL owes Philippine banks US$412 million in outstanding loans, on top of another $900 million in debt to lenders in South Korea.
The court also ordered HHIC-PHIL to publish the commencement order in a newspaper of general circulation for two consecutive weeks, and to serve a copy of the petition to its creditors, Bureau of Internal Revenue, Securities and Exchange Commission, Bangko Sentral ng Pilipinas, Insurance Commission, Department of Labor and Employment (DOLE), Housing and Land Use Regulatory Board, Department of Trade and Industry, and Subic Bay Metropolitan Authority.
HHIC-PHIL was also ordered to provide a copy of the order to its foreign creditors and ensure they receive it within 15 days before the initial hearing on February 8.
The creditors, in turn, were ordered to file verified claims within five days before February 8. If the creditor files a belated claim, the creditor will not be entitled to participate in the proceedings, but will be entitled to receive distributions arising from them, if recommended and approved by the rehabilitation receiver and the court itself, the order noted.
The court also ordered the creditors, involved government agencies, and interested parties to file and serve to HHIC-PHIL a verified comment/opposition to the petition, together with supporting affidavits and documents, within 15 days before the initial hearing on February 8.
Further, the court prohibited HHIC-PHIL’s suppliers of goods and services from withholding the delivery of supplies for as long as the company “makes payments for the said goods and services.”
The court also authorized the shipbuilder to pay its administrative expenses “as they become due.”
In compliance with the Financial Rehabilitation Rules of Procedures, the court suspended “all actions or proceedings in court or otherwise, for the enforcement of all claims” against HHIC-PHIL and “all actions to enforce any judgment, attachment or other provisional remedies against HHIC-PHIL.”
The court, however, barred the shipbuilder from selling, encumbering, transferring, or disposing of any of its properties except in the ordinary course of its business, as well as from making any payment of its outstanding liabilities from the issuance of the commencement order.
Korean newspapers said South Korean-based Hanjin Heavy Industries and Construction Holdings Co., Ltd., (HHICH) and its affiliate HHIC-PHIL have been suffering from a drop in new orders amid the protracted slump in the global shipbuilding sector. HHICH has also been conducting massive restructuring efforts since 2016 by selling non-core assets.
SBMA chair and administrator Atty. Wilma Eisma earlier disclosed that HHIC-PHIL said it “does not have enough cash to repay its loans and that it cannot continue with its operations under these circumstances.”
HHIC-PHL is Subic Bay Freeport’s biggest locator, with a 300-hectare shipyard and an infusion of $2.3 billion in direct investment, and employing about 30,000 workers at the peak of its operations. Since 2008, the facility has built 123 vessels, according to its website. HHIC-PHL’s presence and production in the country contributed to the Philippines’ status as one of the top shipbuilding countries worldwide.
“However, in face of recent liquidity problem, Hanjin Philippines has laid off more than 7,000 workers last December,” Eisma said.
The company is set to lay off another 3,000 more early this year, until just about 300 local workers and seven Korean supervisors would remain by March 2019 to do facility maintenance.
DOLE chairman Silvestre Bello III, in a press conference on January 15, assured HHIC-PHIL workers of getting their severance pay from the company.
