In unexpected turn of even, the Subic Bay Freeport Zone biggest investor Hanjin Heavy Industries and Construction Co.-Philippines (HHIC-Phil) which poured in $2.3 billion investment from the time of their operations way back in 2007 is now in deep financial trouble.
Known to be the biggest employer in Subic, the deep financial problem is attributed to the hundred of millions of dollars in loans taken from some of the country’s leading banks.
Three years ago, former subsidiary Hanjin Shipping Line Co. Ltd. in South Korea also encountered similar financial severe trouble when creditor banks pulled out their support that led to their US$5B in debt.
While they tried to ask for a rehabilitation plan, the valuation of Hanjin Shipping Line Co. Ltd.’s asset turned out to be not enough to cover all the financial obligations they have with the banks. This prompted the court in Seoul, South Korea to declare that Hanjin was officially bankrupt on February 2017.
While other observers say that it seems that HHIC-Phil has not learned from the financial trouble encountered by Hanjin Shipping, many are clueless what really is the real score in their financial turmoil.
According to Trade Secretary Ramon Lopez, the HHIC-Phil had enjoyed the incentives and other benefits given to Freeport locators in the country.
This was also confirmed by Subic Bay Metropolitan Authority Chairman and Administrator Wilma Eisma, who said that apart from income-tax holiday, “The HHIC-Phil is also given subsidized power rates for many years from the Philippine government with a total subsidy of P4 billion more or less over a 10-year period”.
The SBMA Chairman expressed her deep regret upon receiving the news that Korean shipbuilder is in unabated financial turbulence.
Based on the information gathered by Eisma, the company has around $400 million in outstanding loans from Philippine premiere banks apart from another $900 million loans from South Korea creditors.
Eisma also noted that HHIC-Phil has six pending multi-million newbuilding projects and this would jeopardize the continuation of the project if they are not able to work on the proposed rehabilitation plan that would pay its loans.
She further emphasized that the company cannot continue their operations under these financial conditions and cashflow problems.
As early as December 2018, Hanjin has already laid off more than 7,000 workers and another 3,000 are expected to be laid off this year.
But despite of what is going on at Hanjin, Eisma is hopeful that Hanjin would still be able to recover when their creditors would allow their proposed to the rehabilitation plan. Other option to explore is for Hanjin to get some investors who will continue their shipbuilding operations in Subic.