Concerns are growing over additional seizures of Hanjin Shipping vessels that could lead to costly delays in unloading operations after a local court greenlighted the arrest of a vessel despite the troubled firm’s bankruptcy protection.
On Monday, Changwon District Court dismissed the near-bankrupt company’s objection to the court’s decision to allow the detainment and auction sale of vessel Hanjin Xiamen docked in Busan Newport. US company World Fuel Services recently requested the vessel arrest from the court to claim overdue fuel costs.
While the arrest of Hanjin’s assets has been banned upon the stay order under court receivership, the US company claimed Hanjin Xiamen is technically not owned by Hanjin, but by a Panama-based special purpose corporation (SPC), which would make it not Hanjin’s asset.
The cash-strapped shipper built Hanjin Xiamen through a SPC in Panama in accordance with the industry’s customary practice to get loans from the financial sector through the company. The shipping companies generally obtain the ownership of the ships after making the full payment to banks.
Despite the unique ship-ownership system, the beneficially owned ships are usually considered worldwide as assets of shippers. Of Hanjin’s 37 container ships, 34 are beneficially owned.
The Korean law, however, does not stipulate on the ownership of beneficially owned vessels, other than that shipping company-owned vessels are recognized as assets of the shipper.
“Hanjin Shipping made a contract with a Panama SPC to take over the ownership of Hanjin Xiamen when the company fully pays the charter fee by the end of the contract. Since the contract term is valid until March 2019, Panama SPC must be considered as the owner of the vessel,” said the Changwon judges in the verdict.
While the local court’s judgement stirred up controversy here, concerns are now growing over the possible arrest of nine other remaining vessels in Korea, possibly leading to the delay of overall unloading work. The government was pushing to wrap up the unloading by no later than the end of this month.
According to the Ministry of Oceans and Fisheries, 76 of Hanjin’s 97 container ships have finished unloading, and nine were standing by for the unloading in Korean ports as of late Monday.
“(The company) will consider the legal process for post-measures (against the court’s latest decision),” said Hanjin Shipping.
Speculation is growing that the cash-strapped shipper may seek to appeal the court’s decision or consider paying a deposit to the court to lift the arrest order. The company can take back the deposit afterward through the legal process. The estimated amount of deposit is expected to be the payment amount demanded by the creditor, which is reportedly around 1.2 billion ($1.06 million) to 1.3 billion won.
Meanwhile, sources from Hyundai Merchant Marine’s creditors reportedly said the shipper has decided to join bidding for Hanjin’s Asia-US shipping network.
As part of Hanjin’s court receivership measures, the local court put the core route on sale Friday, including the cargo distribution system, seven overseas subsidiaries and five container ships.
Hyundai, however, remained cautious, saying that it is still considering whether to join the bidding, with nothing determined. The bidding is slated for Nov. 7.
Having drawn around 3 trillion won in annual sales, Hanjin’s Asia-US route is considered the central asset of the near-bankrupt company.
By Lee Hyun-jeong (
rene@heraldcorp.com)
