Five of the country’s largest banks are rushing to cover a combined loan exposure of $412 million, most of it lent without the benefit of collateral protection, after the local shipbuilding unit of Korean conglomerate Hanjin declared bankruptcy earlier this week—the biggest corporate default in Philippine history.
More importantly, however, the involved financial institutions—Rizal Commercial Banking Corp.; Land Bank of the Philippines; Metropolitan Bank and Trust Co.; Bank of the Philippine Islands, and Banco de Oro Universal Bank—have decided to move as one to take control of Hanjin Heavy Industries and Construction Philippines’ $1.6-billion shipyard in Subic Bay, Zambales, which employs about 23,000 workers.
“We agreed to work together to protect the interests not only of the banking industry but of the Philippine economy, as well, given a large number of people Hanjin employs in Subic,” the president of one of the creditor banks told the Inquirer in an interview.
Speaking on condition of anonymity, the bank president said his peers from other creditor banks had agreed that “no one will jump the gun” to seize collateral ahead of other creditors, an act that would trigger a free-for-all on Hanjin’s Philippine assets and jeopardize the rehabilitation plan that had been filed in the local courts.
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Eventually, the provisional agreement among members of the loose consortium of Philippine banks may call for the forced sale of the Hanjin shipyard to a strategic investor as a way for the creditors to recoup their loans.
Assets greater than loans
