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BSP COORDINATING WITH BANKS INVOLVED: Hanjin bankruptcy poses headwind for PSE’s Financials sector; 2 Chinese shipbuilders interested in investing in Hanjin Philippines

BSP COORDINATING WITH BANKS INVOLVED: Hanjin bankruptcy poses headwind for PSE’s Financials sector
January 11, 2019

The Philippine stock market is facing strong headwinds that may seriously hit the Financials Sector as five of the biggest banks are exposed to the what may well be the largest corporate default in Philippine banking history, a stock brokerage said Friday.

Subic Bay Metropolitan Authority (SBMA) Chairperson Wilma Eisma revealed on Thursday that Hanjin Heavy Industries and Construction Philippines has filed for a voluntary rehabilitation due to ballooning financial obligations to Philippine and Korean lenders.

“Some local headwinds … may prevent us from cracking well past 8,000 …” said Luis Limlingan, head of sales at stock brokerage Regina Capital and Development Corp., noting the Hanjin situation may overwhelm the positive sentiment from Wall Street.

“Financials may get hit as five of the largest Philippine banks are firefighting the biggest corporate default in the country’s history, an exposure of $412 million, after the local shipbuilding unit of Korean conglomerate Hanjin recently declared bankruptcy,” Limlingan noted.

As of 11:09 a.m., the Financial’s index was down 54.74 points or 3.01 percent at 1,763.68. The benchmark PSEi was down 52.90 points or 0.66 percent at 7,932.33, and the broader All Shares was down 23.42 points or 0.49 percent at 4,741.49.

The Philippine banks involved are Land Bank of the Philippines, Bank of the Philippine Islands, Banco de Oro Universal Bank, Rizal Commercial Banking Corp. (RCBC), and Metropolitan Bank and Trust Co., according to industry sources.

In a separate statemen sent to GMA News Online, RCBC dismissed the severity of the situation. “The amount involved is very manageable and the borrowing company’s business is actually very attractive with a lot of potential,” the bank said.

“With the 5 creditor-banks working together and looking for an investor as one option, the matter’s resolution is just a matter of time and we expect that to be sooner than later,” RCBC added.

The Bangko Sentral ng Pilipinas (BSP) noted in another statement it is in coordination with the banks involved, and that an alarmist attitude in unwarranted at this point.

“Yes, BSP is closely coordinating with creditor banks on this matter,” said Deputy Governor Chuchi Fonacier.

BDO Unibank noted its financial exposure to Hanjin Philippines is insignificant and adequately covered.

“We have an exposure to Hanjin and we are more than adequately provided for potential losses,” BDO president Nestor V. Tan said.

“There’s no cause for alarm. Hanjin loans to the banks are only a tiny fraction of the total loans of the Philippine banking system. And these creditor banks are well capitalized to absorb possible losses. And they have taken action and/or will continue to take action to protect their position,” Fonacier said. —with Ted Cordero/VDS, GMA News

2 Chinese shipbuilders interested in investing in Hanjin Philippines
TED CORDERO, January 11, 2019

Two Chinese shipbuilding companies have expressed intent to invest in debt-riddled Hanjin Heavy Industries and Construction Philippines, the Department of Trade Industry (DTI) said Friday.

The Chinese firms contacted the Board of Investments BOI when they learned through media reports that Hanjin Philippines has filed for a corporate rehabilitation, Trade Undersecretary and BOI Managing Head Ceferino Rodolfo said on the sideline of a press conference in Makati City.

“They’re interested in the shipbuilding industry in general ... but there is an opportunity now with what happened in Hanjin, so we’re linking the investors with Hanjin,” Rodolfo said.

Hanjin Philippines filed on Tuesday a petition before the Regional Trial Court in Olongapo City for voluntary rehabilitation under Republic Act 10142 or “An Act Providing for the Rehabilitation or Liquidation of Financially Distressed Enterprises and Individuals.”

Hanjin Philippines officials revealed to the Subic Bay Metropolitan Authority that the company has around $400 million in outstanding loans from Philippine banks on top of $900 million in debts owed to South Korea lenders.

The Korean shipbuilder is the biggest foreign investor in the Subic Bay Freeport Zone, according to SBMA.

“What this development in Hanjin presents now, it gives investors another entry strategy ... These companies that we talk to can look into a possible takeover of Hanjin as a way of entering the Philippine market rather than starting from scratch,” Trade Secretary Ramon Lopez said in a separate interview.

Rodolfo declined to identify the Chinese firms other than saying one is state-owned and among the top three in the China’s shipbuilding industry.

“They’re in full-range. They can produce big ships and small ships,” Rodolfo said.

The other is a smaller company but with the capacity to produce big ships.

It would be a viable alternative for interested investors in the shipbuilding sector to takeover Hanjin, Lopez noted. “That’s an option, if you’re coming in. Dati it’s just a startup … and you have many , including Hanjin. Now, you’re buying a possible competitor.”

Established in 2006, Hanjin Philippines is a subsidiary of Hanjin Heavy Industries & Construction Co. Ltd.—a multinational company that provides shipbuilding, construction, and plant services in South Korea and internationally.

Hanjin Philippines became the biggest employer among all registered businesses in the Subic Bay Freeport Zone with some 30,000 employees during its peak, and was recognized by both the Philippine Exporter Foundation (Philexport) and the Department of Trade and Industry as top export performer, according to SBMA. —VDS, GMA News