Debt-ridden container carrier Hanjin Shipping plans to raise a total of 411.2 billion won ($357 million) through asset sales, but its main creditor Korea Development Bank says that is not enough for it to secure an aid package.

KDB demanded that Hanjin, part of the group of the same name that also controls Korean Air, supplement its application for debt restructuring, filed Monday to the state-run bank, with an additional and more detailed plan of self-rescue. 

“Once the new self-help plan is submitted, we will review it with other creditor banks,” an official at the state-run bank said.

Hanjin, which ranks No. 1 in container shipping locally and No. 9 globally, has been piling losses for years as the global shipping industry struggles with overcapacity and sharply falling demand. It owes 5.6 trillion won to 10 banks, including the state-run KDB.

The firm is the second shipping firm in Korea to succumb to a mountain of debt this year, after Hyundai Merchant Marine. Industry watchers say Hanjin may have to take similar steps with Hyundai Merchant to strike a deal with creditors.

Aside from efforts to sell assets, Hyundai Merchant Marine has decided on a painful capital cut and is currently in the process of reducing its capital by 87 percent. Hyundai Group’s chairman Hyun Jeong-eun in February spent 30 billion won out of her own pocket to support the ailing shipping unit.

Creditors of Hyundai, also led by KDB, agreed to a “conditional” debt settlement agreement and gave it a three-month extension of maturing debt and interest. The key condition for creditors to consider additional support is a sizable reduction in ship charter fees, which last year amounted to nearly 2 trillion won. Hyundai says it is in the final stage of negotiations with 16 ship owners.

In a regulatory filing on Tuesday, Hanjin disclosed full details of its 411 billion won self-help plan, which the KDB saw as insufficient.

Broken down, 175 billion won is to come from the sale of cargo terminals; 102 billion won from the sale of properties including an office building in London and the remaining 134 billion won from disposal of “Hanjin” trademark rights and equity stakes in its bulk-shipping and other units.

Like Hyundai Merchant, Hanjin will also try to lower charter fees through negotiations with ship owners, it said.

Hanjin Group chairman Cho Yang-ho said in a written pledge that he would hand management rights over to creditors, but did not indicate any use of his own money to help salvage the unit like Hyundai’s Hyun did.

Meanwhile, Cho’s sister-in-law Choi Eun-yeong, who ran Hanjin Shipping as its chairwoman until 2014, is under investigation by the Financial Services Commission on suspicions of insider trading after she was found to have fully divested of her equity stake in the firm just days before news of Hanjin turning to creditor-led rehabilitation reached the market.

By Lee Sun-young (milaya@heraldcorp.com)