HANJIN SHIPPING BANKRUPTCY UPDATE
The Hanjin Shipping bankruptcy continues to have worldwide impacts with legal battles over cost and equipment liabilities related to the bankruptcy playing out in the courts. But there is a glimmer of good news on the horizon.
Hanjin filed for court protection in August 2016 after its creditors, led by Korea Development Bank (KDB), decided not to provide additional financial support to the company. The New Jersey Bankruptcy court is hearing issues related to the bankruptcy filing, which left its 97 ships and some 500,000 containers around the world in limbo as the company searched for money to pay for unloading costs. Hanjin is seeking Chapter 15 status in the court, meaning it would recognize the South Korean bankruptcy case, allowing certain actions to be taken in the United States to move the case along.
On October 20, 2016, the federal bankruptcy judge in New Jersey ruled that Hanjin must release cargo for which a beneficial cargo owner had paid freight charges, blocking the carrier’s attempt to use the freight to demand payment from the shipper of accounts receivable for other work. The court also expressed concern that Hanjin failed to notify the fuel company OceanConnect Marine in a timely fashion that its charter for a ship had expired (which would have allowed the ship to be “arrested” for unpaid debts) before the ship had left U.S. waters and the fuel company likely lost any opportunity to collect some $837,338 of debt for fuel. Thus, the court ordered that Hanjin provide notice “within an hour” of future situations where a ship is going off charter.
The company is now seeking to sell its assets to repay debt which amounted to KRW 6 billion at the end of June. The good news for Hanjin is that just this week, a South Korean shipping company won the bid for some of Hanjin’s assets. Korea Line Corp., the nation’s second-largest bulk carrier, beat Hyundai Merchant Marine Co. to be the preferred bidder for Hanjin’s Asia-U.S. business, a spokesman for the Seoul Central District Court said in a text message Monday. Final sale documents will be signed Nov. 21, per the court.
Korea Line offered better terms in its bid, including taking on all employees, the court spokesman said in a text message, without elaborating. Also, included in the bid was Korea Line’s interest to buy Hanjin’s 54 percent stake in a port terminal in Long Beach, California and some of Hanjin’s vessels. The company’s Asia-U.S. route reportedly brings up to KRW 4 trillion (USD 3.4 billion) per year, and its market share stands at 7 percent, which is the sixth-largest among global shipping companies.
Hanjin is also winding down its European business and will let go of about 700 of its crew. The legal and financial fallout from this bankruptcy is likely to take some years to finally be resolved.
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