Gantry cranes at the Hanjin Newport Co terminal at Busan New Port in South Korea. Some ships have been seized by creditors. Image Credit: Bloomberg

SEOUL: A key member of South Korea’s Hanjin Group agreed Saturday to a conditional bailout of the group’s shipping unit, whose collapse has sparked turmoil worldwide on the high seas.

The board of group unit Korean Air, meeting for the third straight day, decided to lend 60 billion won ($55 million) to Hanjin Shipping, two thirds of whose cargo fleet is marooned at sea due to huge debts.

“The board members decided to provide the loan but only in exchange for collateral (from Hanjin Shipping),” a company spokeswoman told AFP.

At the two previous meetings on Thursday and Friday, some board members objected to offering the loan and securing collateral afterwards, she said.

It remained unclear whether the badly indebted Hanjin Shipping could provide matching collateral.

The company is seeking bankruptcy protection at home and in the US after creditors rejected its latest plan to deal with a $5.37 billion debt.

Its bankruptcy would be by far the largest in the history of container shipping, which is suffering its worst downturn in six decades because of slumping global trade and a slowdown in China.

Hanjin Group announced earlier in the week it would inject 100 billion won, including a personal donation of 40 billion won from its chairman and biggest shareholder Cho Yang-Ho, to help the shipping unit.

The remainder would come from Korean Air.

Earlier on Saturday, a Hanjin Shipping spokesman said a US court had issued an order allowing it to unload some cargo without fear of creditors seizing its ships.

As of late Friday, 92 of 141 ships being operated by the world’s seventh largest shipping firm were stranded at sea.

They have been banned from docking in the US, China and many other countries until there are guarantees of payment for service firms and port workers.

The freight on the 92 ships is reportedly worth $14 billion, the Chosun Ilbo daily said. Much of it is destined for US stores before the Thanksgiving and Christmas shopping spree.

‘No expertise’

Some ships have been seized by its creditors, further complicating the problem.

“The New Jersey bankruptcy court issued a stay order” aimed at protecting some ships from being seized by creditors, Hanjin Shipping spokesman Jang Jin-Hong told AFP.

Jang said the court granted the order after it was shown the bailout plan by Hanjin Group.

Consequently, four Hanjin container carriers out of the 92 had begun unloading, he said.

Hanjin has seen its financial woes deepen since the 2008 global financial crisis.

It posted a net loss of more than 473 billion won in the first half of this year alone, after racking up total net losses of about 1.2 trillion won over the past three years.

The shipping firm’s previous owner Cho Su-Ho died in 2006 and his widow Choi Eun-Young, a housewife with little business experience, took the helm.

The firm’s troubles are partly blamed on long-term charters for high fees which she agreed when global shipping was still booming.

At a parliamentary hearing Friday into the country’s troubled shipbuilding and shipping industries, Choi shed tears and said she “keenly” felt her responsibility.

“I had no expertise as I had been stuck home as a housewife” she said.

Choi has been under investigation on charges she was involved in insider dealing — selling off the shares of her and her two daughters before the company sought court receivership in August. She has denied the claims.