TAIWAN's container liner Yang Ming is in the greatest financial danger following the bankruptcy of Hanjin Shipping, according to Drewry Financial Research Services (DFRS), adding that the line has the industry's most leveraged balance sheet, with a net gearing of a massive 437 per cent at the end of the third quarter.

The figure is way above the industry average of 124 per cent and is nearly five times that of its closest regional peer, Evergreen, The Loadstar reported.

The report says: "Yang Ming's high debt is a great cause for concern for us, given the heightened financial risks. Even with recovery in the underlying freight market, the debt burden without a restructuring is a red flag and a clear sell signal for us."

DFRS noted that Yang Ming had accumulated NTD38.4 billion (US$1.2 billion) in losses since 2009, with its net loss for 2016 at around $400,000 by the end of the third quarter.

The analyst believes the carrier's high cost structure, combined with its debt mountain, will "keep Yang Ming in the red in 2017", despite an improved outlook for freight rates.

In November, the Yang Ming board announced it would slash executives' pay by 50 per cent and the salaries of senior line managers by 30 per cent, among a raft of desperate measures to stop the rush of red ink.

Yang Ming, founded in 1972, is a member of the CKYE east-west vessel alliance, but in April it will join with Hapag-Lloyd and the soon-to-be-merged container businesses of K Line, MOL and NYK in THE Alliance. Its dire financial health will be of great concern to the other members.

THE Alliance is the first vessel-sharing agreement to include safeguards for shippers in case of a failure by one of the partners.

According to US federal maritime commissioner William P Doyle, THE Alliance's filing with the FMC includes "framework language" to allow other members to take over the operation of the affected party to avoid a repetition of the supply chain chaos caused by the sudden collapse of Hanjin.

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