The sale price of Hanjin Heavy Industries & Construction, which will be put up for sale by its creditors, is likely to be set based on the company’s book value rather than its asset value.
Creditors of Hanjin Heavy including Korea Development Bank (KDB) and Woori Bank have decided to sell their combined 83.45 percent stake in the shipyard, investment banking (IB) industry sources said on April 21. The creditors have picked Samil PwC to manage the sale process and plan to launch a formal process to sell the debt-ridden shipbuilder in June.
The creditors converted 687.4 billion won worth of debts to 250 billion won worth of shares last year. With the Filipino commercial banks that own debts of the Subic shipyard in the Philippines completing the conversion, creditors’ stake in Hanjin Heavy has increased to mid-80 percent.
South Korean banks that hold stake in Hanjin Heavy – KDB, Woori, Nonghyup, Hana, Kookmin and the Export-Import Bank of Korea – all determine the value of their shares 5000 won per share, representing the book value of their 83.45 percent stake worth 380 billion won.
The creditors aren’t likely to sell the shipbuilder at a lower price than the book value, setting the book value as the Maginot Line for the sale. Accordingly, the creditors’ minimum desired price for Hanjin Heavy is expected to remain at 380 billion won level. Considering the amount of credit that was extended, the value of the creditors’ stake in the shipbuilder is highly likely to remain below 500 billion won.
Some market observers expect the sale price may go higher due to the higher asset value of its Yeongdo Shipyard in Busan, but most observers note that the creditors will have more difficulties in seeking potential buyers if the sale price rises too much.
The value of real estates in Yeongdo Shipyard has risen thanks to the possibility of land development near the shipyard by Busan city government to host the country’s first World Expo in 2030. Yet, no actual progress has been made as of now. The book value of real estates in Yeongdo Shipyard is 357.1 billion won, but industry watchers anticipate the value to be in a range of 400 billion won to 500 billion won. (By reporter Choi Ik-hwan)