Hanjin in bankruptcy - update

Hanjin insolvency, bankruptcy

On August 31, 2016 the globally seventh biggest Container Liner Hanjin Shipping Co.Ltd. (herafter Hanjin) filed for a debt restructuring moratorium with the competent Korean insolvency court in Seoul. It became quite quickly clear that Hanjin will not be able to find a sustainable solution for the restructuring of its debts and will not be able to continue its operative business. Consequently, the Seoul District Court decided on February 2, 2017 to formally open insolvency proceedings against Hanjin on February 17, 2017 and by doing so to order the liquidation of Hanjin by insolvency/bankruptcy.

De facto the liquidation of Hanjin is already in full swing. Assets of Hanjin are – as far as possible – being sold to third parties. The first vessels arrested by creditors were sold bymeans of judicial sales already in November 2016[1]. MSC bought Hanjin’s shares in Total Terminals International (TTL; Seattle und Long Beach) and Hyundai Merchant Marine (HMM) informed in January 2017 to take over around 220 employees of Hanjin (Onshore-, Offshore- und Overseas-Staff as well as Ship Managers).

After completion of their last voyage and discharge of the cargo, Hanjin had an idle fleet of 98 vessels and an aggregate capacity of around 610’000 TEU for which it was impossible to find any employ. Apparently, 31 vessels of this fleet around could be re-chartered. Maersk Line has shown the biggest appetite for the former Hanjin fleet by chartering 11 vessels having a capacity of 77,000 TEU. Four vessels have been sold for scrapping. However, 63 vessels are today still blocked and without any perspective for employ[2].

Considering the current market situation, there is a possibility that the proceeds from the judicial sales or private sales of vessels will not fully cover the mortgages. The insolvency estate of Hanjin will therefore most likely not profit from these sales. Unsecured Creditors of Hanjin may not expect to receive a substantial dividend. This is also evidenced by Hanjin informing the US Insolvency Court that its liabilities vis-à-vis US creditors outweigh its US assets by around USD 124 million[3]

The last container had been discharged only in the beginning of December 2016 in Vancouver[4], around three months after the ordering of the debt restructuring moratorium. Ports were forced to offer its clients tailor made solutions to facilitate the release and return of con-tainers under the given circumstances. This was of great importance not only in view of the Christmas shopping season but also in view of the contractual duties of the consign-ees vis-à-vis their respective clients. The additional costs which spread through entire supply and distribution chains will continue to have an impact on the economy as well as on insurers for some time to come.

* Raphael Brunner | Prof. Dr. Andreas Furrer

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[1] http://worldmaritimenews.com/archives/207475/report-woori-bank-disposes-of-four-hanjin-tankers/.

[2] http://worldmaritimenews.com/archives/211512/drewry-many-ex-hanjin-ships-to-remain-idle-for-some-time/;

http://www.joc.com/maritime-news/container-lines/hanjin-shipping/most-hanjin-ships-still-seeking-employment_20170130.html.

[3] http://www.joc.com/maritime-news/container-lines/hanjin-shipping/hanjin-set-ask-us-court-more-time-disclose-assets_20161227.html.

[4] http://www.lloydsloadinglist.com/freight-directory/news/Final-boxes-discharged-from-Hanjin-ships/68121.htm#.WJQdeRvhCUk.

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