By Rea Cu & Samuel P. Medenilla
THE Land Bank of the Philippines (LandBank), as well as the other four creditor banks of Hanjin Heavy Industries and Construction Philippines (HHIC-Phil) are working together to address the $412-million debt problem that forced the company to seek relief from the courts on January 8, the Department of Finance (DOF) said.
Finance Secretary Carlos G. Dominguez III told reporters that all five creditor banks should focus on working together to address the financial fallout from the troubles of the giant Korean shipbuilder. Once known as Subic’s shining star, being the largest investor and employer at the free port, Hanjin filed for corporate rehabilitation.
“LandBank has an exposure to Hanjin, together with other banks. I don’t know the exact exposure of the other banks, but definitely, we are not the largest single lender. It’s a problem, we have to address it.
There are assets to be had, and this is a difficult problem; it has to be worked through by the banks,” said Dominguez, who is also chairman of LandBank.
It was reported that the five domestic banks with exposure to Hanjin are: The Rizal Commercial Banking Corp. (RCBC), BDO Unibank, Bank of the Philippine Islands (BPI), Metropolitan Bank and Trust Co. (Metrobank), and LandBank.
“It’s going to hurt, but it’s still the early days. The banks have agreed to work together, and see how we can move forward here. The real important thing here is, what are the prospects in their industry, are there good prospects in the industry…,” Dominguez added.
As Hanjin propelled the Philippines to the status of fourth-largest shipbuilder in the world, the Department of Labor and Employment had listed shipbuilding among the most promising industries for Filipino workers.
Hanjin, however, had apparently been impacted by the fallout from the woes of international shipping lines, which cashed in on the industry boom in recent years by putting big orders with builders like Hanjin, but under so-called heavy-tail contracts that allowed the shipping firms to make bigger payments toward the end of the production schedule. This forced the builders like Hanjin to borrow big to finance production, according to a special report by the BusinessMirror (See, “A giant stumbles in Subic: Too big to fail?” BM Broader Look, pages A4-A5, January 10, 2019).
LandBank President and CEO Alex V. Buenaventura also told financial reporters earlier that the Bank’s exposure to Hanjin is around $85 million, expressing hope that the bank can recover its exposure.
“We have an $85-million exposure there. We’ll have to address the problem. But the good news is that we can recover because the assets of the shipyard are worth $1.2 billion, and the total exposure of the creditors is less than $400 million; down the road we hope to recover our exposure,” Buenaventura said.
“I think the shipping industry is a very important industry, supporting global development…The global economy is improving, the time will come, and I think it’s around the corner, there will be a lot of moving goods through ships,” he added.
Buenaventura said the five creditor banks are moving swiftly to address the problem and a meeting was held on January 10. “The group is coordinated. They are working together…And they agreed to work together until the end.”
On January 9, the BusinessMirror broke the story that Hanjin filed for corporate rehabilitation at the Olongapo Regional Trial Court, seeking protection from its creditors.
The local Hanjin operations had laid off some 7,000 workers last December, and sources said it plans to fire 3,000 more in the coming months, and retain some 300 workers to maintain its factory in Redondo Peninsula, in Subic Bay in Zambales.
Meanwhile, the government was also supporting the efforts of Hanjin to get back on its feet by helping vet potential white knights, which include two Chinese shipbuilders.
Trade Undersecretary Ceferino S. Rodolfo Jr. on Friday said the government is looking for foreign investors that could bail Hanjin out of its financial troubles.
4,000 workers
Only 4,000 of its total work force now remain in Hanjin Heavy Industries and Construction Co.-Philippines (HHICC-Phil) Inc. as it continues to grapple with its financial crisis.
The DOLE finally confirmed the previous report of the BusinessMirror the shipbuilding firm was forced to retrench two-thirds of its 11,526 workers last month as it reduced its operations from lack of clients.
“Based on January 2019 [termination] report of Hanjin subcontractors to DOLE-Region 3, 3,812 workers are undergoing reduction of workdays,” DOLE’s Bureau of Local Employment (BLE) Director Dominique R. Tutay said in a SMS.
“These are the remaining workers of the 17 subcontractors of Hanjin,” Tutay said. In the initial years of its operations in the province of Zambales since 2006, HHICC-Phil employed about 30,000 workers. The number of its employees gradually declined over the years.
Labor Assistant Secretary Benjo M. Benavidez said HHICC-Phil is now only maintaining a skeletal force as it awaits the outcome of its court appeal to undergo financial rehabilitation.
“The remaining workers are there in case it gets any request or orders as well as to help in the maintenance of the facilities of the massive shipyard,” Benavidez said.
If the rehabilitation is successful, he said, HHICC-Phil might hire additional workers as it resumes normal operations.
Transition process
The Trade Union Congress of the Philippines (TUCP) urged the government to provide an interagency intervention to HHICC-Phil to ensure the welfare of its workers.
“It could become a national economic and security disaster issue for the country if we just stand by and do nothing,” TUCP President Raymond Mendoza said in a statement.
Labor Secretary Silvestre H. Bello III earlier ordered the creation of a technical working group to address the needs of the affected workers, particularly the 7,714 displaced employees. Benavidez said their priority is to ensure the retrenched workers get separation pay and other entitlements.
HHICC-Phil managed to pay its liabilities to the said employees, but some, like those of the Asian Ocean Corp. (AOC), a service contractor of Hanjin, asked for higher separation pay. Employees of AOC sought the intervention of DOLE’s office in Pampanga to resolve the matter on December 12, 2018.
Bukluran ng Manggagawang Pilipino (BMP) Chairman Leody de Guzman said HHICC-Phil should prioritize paying its liabilities to its workers over its creditors.
“Hanjin’s multimillion-dollar shipbuilding empire was built upon the collective toil and slave-like conditions of its employees. Their workers deserve to be paid in full, immediately and without preconditions,” de Guzman said in a separate statement.
Aside from settlement of benefits, Bena-videz said DOLE-Region 3 also started the profiling of the retrenched workers so they could be provided with new employment opportunities. “Many of them can easily find a job since most of them highly skilled. They could be employed in the construction sector or in other shipbuilding companies,” Benavidez said.
Selective intervention
Officials of the Department of Trade Industry (DTI) and the Board of Investments (BOI) are currently coordinating with HHICC-Phil management on possible companies which could take over its operations.
It was reported by trade officials that two Chinese firms have shown interest on HHICC-Phil. However, Nagkaisa, a coalition of 40 labor groups, opposed handing over HHICC-Phil to Chinese companies, citing security concerns.
It said HHICC-Phil should consider getting technical cooperation from the European Union, particularly Aker Group of Norway.
“We have good relations with Norway in the peace process with the NDF [National Democratic Front] and it offers and gives assistance and employment to our seafarers. We recommend that Labor Secretary Bello initiate talks with the government of Norway,” Nagkaisa Chairman and Federation of Free Workers President Sonny Matula said.
With a report by Elijah Felice E. Rosales
Image credits: Henry Empeño