The anatomy of a bankruptcy

By: | Issue #647 | at 08:00 AM | Channel(s): Liner Shipping  

The anatomy of a bankruptcy

The Hanjin bankruptcy shook the shipping world like no other. While it might not have directly been responsible for the realignment in ocean carrier alliances, it was certainly on every shipping executive’s mind, a reminder of what could go wrong. Matt Miller examines the anatomy of the Hanjin bankruptcy and the wide legacy it leaves.

Late last August, the Korean Development Bank (KDB) refused to provide additional financial support to beleaguered Hanjin Shipping, forcing the line into a South Korean court-ordered receivership. Bedlam ensued. Some ships were arrested and seized. Others bobbed aimlessly offshore, or were stuck in ports far from where they needed to be. Billions of dollars of cargo in thousands and thousands of containers were stranded. Freight forwarders, ports, trucking companies, NVOCCs and railroads all scrambled to figure out how to move goods and get paid, while angry creditors grappled with desperate shippers.

“That first month or two was chaos,” said Asa Markel, a Los Angeles-based attorney with Masuda Funai.

Once the world’s seventh largest container line, Hanjin was declared bankrupt in February by a South Korean court and liquidated; its ships sold for scrap. Some $5 billion in loans were pretty much wiped out, much of it held by KDB.

Hanjin’s collapse in a battered global shipping market is still being assessed. So, too, is its impact on ship financing, which is already in turmoil and racked with enormous debt, huge uncertainty and danger. (See related story, page 8)

“The shipping business is so interrelated,” said Arthur Rosenberg, a New York-based lawyer with Holland & Knight, with wide experience in maritime bankruptcies. “All it takes is one domino to fall and you have a bunch of teetering dominos.”

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American Journal of Transportation