Hanjin bankruptcy: S Korea throws lifeline to shipping firm

South Korea's government has said it might provide Hanjin with loans to keep the bankrupt shipping giant afloat.

Officials said Seoul could give 100bn won ($91m; £68m) or more in long-term funding at low interest rates if Hanjin provided the necessary collateral.

The shipping company's shares rose more than 20% on the news of a lifeline.

Hanjin's collapse has left much of its fleet stranded at sea, unable to dock over fears that vessels be seized by creditors.

Parent company Hanjin Group on Tuesday also said it would inject 60bn won in fresh funds to resolve the disruptions to the cargo transport currently stuck at sea.

Chairman Cho Yang-ho would contribute another 40bn won from private funds, according to a company statement.

Hanjin Group is a huge, family-dominated conglomerate and also includes Korean Air.

What happens when a shipping firm goes bust?

Government officials in Seoul said that more than $90m of public funds could be available to the stricken company if it could also raise money from other sources. This would be to help the company in the longer-term.

The immediate problem, though, is the company's ships out at sea because ports say they won't accept them without being sure that port-fees will be paid.

These vessels only have fuel and food for crews for a matter of weeks. Hanjin Shipping's parent company says it will try to raise the $90m needed to sort this out.

Whatever funds are raised, the economics of the industry is unlikely to change soon. Nobody is forecasting a big rise in demand for container shipping.

The question may be whether the South Korean government is prepared to bail out a company which would find it hard to survive otherwise.

Hanjin Shipping last week filed for receivership in South Korea after attempts to raise fresh funding for the indebted company failed.

On Monday, the company said it would seek bankruptcy protection in more than 40 countries to protect its fleet from being repossessed.

Under bankruptcy protection a company can reorganise its debts and stop assets from being seized.

Hanjin is the world's seventh-largest container line and has been unprofitable for four of the past five years.

The global economic downturn in recent years severely affected profits across the cargo shipping industry.

Fierce competition and falling prices had lead to a $5.4bn (£4.1bn) debt for Hanjin before its creditors refused to offer a new lifeline.