As Hanjin Collapses, Creditors Race to Court

     BALTIMORE (CN) — Businesses around the world are scrambling to secure assets after Hanjin Shipping, the world’s seventh-largest shipping line, filed for bankruptcy protection.
     The ripple effect of the announcement began almost immediately Wednesday, with Hanjin ships already being denied entry into ports for fear of not being paid for services.
     The Wall Street Journal reported that as many of 10 Hanjin ships had been seized in China.
     “It’s a very serious situation and there is going to a huge impact on global shipping,” said Paul Slater, chairman and CEO of First International Corporation and a global financial adviser of the maritime and energy industries.
     The bankruptcy has been coming for some months. Creditors have been working since May to restructure the South Korean company’s debt, which totaled $5.5 billion in June.
     While the courts in Seoul try to sort out the situation there, companies here are trying to utilize the U.S. courts to secure their assets.
     In U.S. District Court in Maryland, Montemp Maritime, a Liberian corporation with its principal offices in London, brought a complaint Wednesday to begin garnishing Hanjin property. Montemp is owner of a ship named the Hanjin Louisiana, which is operated under a time charter, by the South Korean company.
     In a 6-page request for issuance of writs of maritime attachment, Montemp claimed it has not been paid more than $1.6 million in rent on the 750-foot vessel, which says is headed for Karachi, Pakistan.
     Discussing the situation in an interview, Slater said the reverberations of Hanjin’s bankruptcy will take months or longer to play out.
     “It get very complicated quickly,” said Slater, explaining that many of the ships owned by other companies and leased by Hanjin are financed with money from banks that will not receive loan payments if the time-charter payments are not being made.
     Also at issue are the actual contents of the containers on Hanjin’s ships. Included in the list of garnishees in the Montemp case are electronic manufacturers LG America and Samsung.
     It may take a long time for those with cargo on Hanjin’s ships to get their hands back on the contents of the containers.
     Some of that cargo might be held by Hanjin’s creditors in actions much like what we’re seeing Montemp take, Slater predicted.
     He said that what we’re seeing is the result of two things. The first is a precipitous decline in manufactured goods being shipped to America from Asia, which has led to a glut in capacity in international shipping. Hanjin’s bankruptcy is part of the market correction that inevitably occurs when supply outpaces demand.
     “The Korean government wants Hanjin’s domestic rival, Hyundai [Merchant Marine Co.,] to take over operations, but it’s not as easy as it sounds,” said Slater.
     “There is a lot going on, including who owns the ships, who owns the cargo and who owns the actual containers,” Slater said. “This is going to take some time to sort out.
     A spokesman for Hanjin did not immediately return emails seeking comment.
     J. Stephen Simms and attorney with Baltimore-based Simms Showers LLP did not respond to a request for comment.

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