On August 31, 2016, Hanjin Shipping, one of the world’s largest container lines, filed for rehabilitation and the appointment of a receiver in the Seoul District Court in South Korea. The company is reported to have approximately $5.5 billion in debt, owed to both lenders and trade creditors. The filing has already caused significant disruption and confusion in the maritime sector, including material delays in the delivery of goods to port. Currently, there is little clarity on the exact form that any proposed restructuring will take. The South Korean court has issued a comprehensive injunction and asset protection order, which blocks creditors from arresting or seizing Hanjin assets and prevents the company from disposing of its assets or paying its debts. Creditors, including banks and bondholders, ship owners, container lessors, and ports, terminals and container yards, among others, will have to carefully consider all options as the situation unfolds.
In aid of its Korean rehabilitation proceeding, it is highly anticipated that Hanjin will file for protection in the United States under Chapter 15 of the Bankruptcy Code, which provides for the recognition of foreign insolvency proceedings. If recognition under Chapter 15 is sought and granted, Hanjin would receive certain protections to aid its Korean proceeding (although no separate rehabilitation proceeding would commence in the United States). Most notably, upon recognition, the U.S. Bankruptcy Code’s “automatic stay” would apply with respect to the debtor and the property of the debtor that is within the territorial jurisdiction of the United States. This extension of the automatic stay would prevent certain collection actions against Hanjin’s U.S. assets, including vessel arrests, asset seizures, lien foreclosures and contract terminations, among others. Hanjin could also request broader injunctive relief that it believes necessary to protect its assets, which request could be challenged by creditors.
The situation is in its very early stages, and Seward & Kissel will be monitoring all developments. These worldwide proceedings will be complex, and creditors will likely be required to carefully consider all options in dealing with Hanjin’s rehabilitation. As such, we would encourage affected creditors to seek guidance in the near term to best protect their position and maximize their recoveries. Seward & Kissel is available to assist you in your Hanjin-related inquiries. Please contact Lawrence Rutkowski at 212-574-1206 or rutkowski@sewkis.com; Bruce Paulsen at 212-574-1533 or paulsen@sewkis.com; John Ashmead at 212-574-1366 or ashmead@sewkis.com; or Robert Gayda at 212-574-1490 or gayda@sewkis.com.
