Solving Hanjin’s Riddle

It sounds a bit like a riddle: how can Hanjin develop a fleet of larger vessels, balance its present fleet with newly acquired DSR Senator and aggressively expand trade routes while raising cash during a severe economic downturn in Asia? While the question seems complex, the answer is rather straightforward: sell containerships to Greek owners while sweetening the deal with a few years of time charter cover. The buyers of the vessels are put in the fortuitous position of immediately having strong positive cash flow, a method of writing down the value of the vessel, and even an asset-play when the ships come off charter. And that is exactly what Hanjin has been doing, with verve.

The buy side of Hanjin’s recent ship sales is interesting for a couple of reasons. First, the Hanjin deal structure, perhaps exacerbated by the credit situation in Korea and the prospects of the container market, could be a harbinger of a developing trend in the box shipping industry. Next, it is our opinion that deals with forward charter cover will lower barriers to entry and expand the universe of buyers, a situation which may breathe some badly needed liquidity into the container market.

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