Is Hanjin to be followed by Vietnamese shipping firms?
Experts have warned that some Vietnamese shipping firms, incurring big debts, will soon follow Hanjin and file for bankruptcy. At least two – Vinashinlines and Falcon – have been following procedures to declare bankruptcy.
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The fact that Hanjin, one of the 10 largest shipping firms in the world, has filed for bankruptcy, is a clear proof. Bankruptcy may also be the future of many Vietnamese shipping firms.
In fact, some shipping firms have filed for bankruptcy. Vinashinlines and Falcon Shipping, the two subsidiaries of the Vietnam National Shipping Lines (Vinalines), for example, did this in late 2015.
Both Vinashinlines and Falcon once had a bright future. In late 2007 and early 2008, the shipping markets witnessed the hottest ever growth with the ship chartering fee increasing day after day.
In May 2008, a 50,000-ton ship could be chartered for up to $85,000 a day.
Vietnamese shipping firms prospered quickly and had a profitability rate far more attractive than other business fields.
The bright business prospects then prompted shipping firms to expand their fleet. They rushed to borrow money from banks to buy new ships.
However, the ‘bubble’ burst. The chartering fee dropped dramatically to $3,000 per day in late 2008 because of oversupply.
According to an analyst, one of the reasons Vietnamese firms still cannot recover from difficulties was that they abused financial leverage.
In the excitement about industry development, commercial banks approved big loans, which were 10-15 times higher than stockholder equity.
Both Vinashinlines and Falcon have had big losses. According to the State Audit, by the end of 2014, Vinashinlines had stockholder equity of minus VND8.5 trillion, while the figure for Falcon was minus VND2.1 trillion.
Viet Hai Shipping & Real Properties Corporation, or VSP, a formerly well-known name, is also on the verge of bankruptcy.
The shipping firm took a loss of VND3.2 trillion in 2009-2013. By the end of 2013, its stockholder equity had decreased to minus VND1.8 trillion. Though VSP has sold many ships, it still has huge debt of VND2.7 trillion.
Another big name, the Northern Shipping JSC (Nosco), has charter capital of VND200 billion, but has incurred loss of VND3.3 trillion and payable accounts of VND5 trillion.
