From deficit to diversified: Han & Co's three-step overhaul of its shipping portfolio

Han & Company (Han & Co), a private equity fund manager, has been steadily restructuring its major shipping portfolio assets — holdings it has nurtured for more than a decade. The overhaul began with a shift toward long-term transport contracts shortly after acquisition, progressed to broadening the shipper base, and has now culminated in a fleet swap valued at around 1 trillion won ($707 million) — a sequential, phased restructuring of the business.

According to investment banking industry sources, Han & Co is currently carrying out a trillion-won-scale fleet portfolio rebalancing between its two portfolio carriers, SK Shipping and H-Line Shipping. Both companies were in financial distress when Han & Co acquired them, but over the past decade or so they have undergone a complete transformation through roughly three distinct phases.

The first phase focused on eliminating earnings volatility and escaping a loss-making structure. When Han & Co acquired what is now H-Line Shipping — then the dedicated vessel division of Hanjin Shipping — in 2014, and SK Shipping in 2018, both companies were struggling financially, burdened by high debt ratios and exposure to shipping market swings.

Immediately after each acquisition, Han & Co sharply reduced the share of spot business, where earnings fluctuate with freight rates, and established long-term transport contracts with major domestic conglomerates as the core revenue source. Long-term transport contracts involve carrying cargo for creditworthy shippers on a stable, multi-year basis, generating fixed sales regardless of shipping market conditions. Because variable costs such as fuel are often indexed into freight rates and settled accordingly, the model allows carriers to protect profitability even during downturns.

At SK Shipping, the share of long-term contracts was significantly expanded to reduce earnings volatility. The proportion of contracts lasting five years or more rose from 70 percent of total sales at the time of the 2018 acquisition to 87 percent by the end of 2024.

H-Line Shipping similarly broke away from the uncertain business structure of its Hanjin Shipping days, shifting its portfolio toward long-term dedicated vessel contracts with major corporations and state-owned enterprises, including Posco, Korea Electric Power Corporation and Korea Gas Corporation.

Once the fundamentals were in place, the second phase focused on securing a broader range of quality shippers to reduce dependence on any single customer and spread risk.

At the time of acquisition, SK Shipping was often criticized for its heavy reliance on intra-SK Group cargo, which limited its growth potential. In response, Han & Co maintained stable long-term contracts with existing SK Group affiliates — SK Gas, SK E&S and SK Energy — while actively seeking out creditworthy shippers at home and abroad. The carrier expanded its customer base to include Korea Gas Corporation, state-owned power generators such as Korea South-East Power (KOEN) and other public utilities, as well as global energy majors including QatarEnergy, strengthening earnings stability in the process.

H-Line Shipping also broadened its roster of major customers beyond domestic names such as Posco, Korea Electric Power Corporation, Korea Gas Corporation and Hyundai Glovis to include global shippers such as Brazil's Vale and Switzerland's Vitol.

The next phase centers on specialization and asset streamlining through a fleet swap between the two portfolio companies. Han & Co has adopted a swap arrangement under which H-Line Shipping transfers 16 LNG carriers to SK Shipping in exchange for 12 oil tankers and approximately $300 million in cash.

Once the transaction is complete, SK Shipping will solidify its identity as a clean-energy specialist carrier focused on LNG, rising to become the world's third-largest LNG operator. The strategy reflects a bid to concentrate on the gas carrier segment — where demand is expected to grow amid the global energy transition — while simultaneously strengthening both profitability and ESG competitiveness.

H-Line Shipping, for its part, will shed the capital-heavy LNG vessels and secure cash liquidity, reducing depreciation and fixed-cost burdens in what amounts to an asset streamlining exercise. At the same time, it plans to take on oil tankers backed by long-term contracts, repositioning itself as a leading specialist in tanker and bulk shipping.

"They have transformed shipping assets that were once bloated and financially unstable into a stable earnings structure anchored by long-term contracts, and are now pushing further toward specialization and a leaner asset base," an investment banking industry official said. "By securing infrastructure-level stability that transcends the inherent volatility of the shipping industry, they are enhancing the value of the portfolio."