Hanjin Shipping hearing continues in New Jersey

A bankruptcy court in Newark, N.J. will hear requests for modifications as Hanjin Shipping’s biggest shareholder, Korean Air Lines, has postponed a decision to provide cash to the carrier.

UPDATED
   As a bankruptcy court in Newark, N.J. resumed a hearing Friday on Hanjin Shipping’s request that its insolvency and rehabilitation proceeding in Korea be recognized, media outlets were reporting that the shipping company’s biggest shareholder – Korea Air Lines – has postponed a decision on providing cash to the container carrier.
   During a break at the hearing, counsel for Hanjin worked with beneficial cargo owners (BCOs) and service providers on language to be included in the order that sets a general framework for BCOs to rescue their cargo at their own expense provided they’ve paid their ocean freight charges to Hanjin. Any door-to-door agreements that have not been fully met by Hanjin (e.g. discharging cargo in Savannah as opposed to bringing it all the way to Atlanta) will be amendable to reflect the reduced service provided by Hanjin.
   U.S. Bankruptcy Court Judge John Sherwood was expected to sign an order later this afternoon or evening that will include basic protocols for BCOs.
   One major issue still unresolved though is what happens to containers and chassis once shippers take delivery of cargo, assuming they’re able to do so.
   BCOs don’t want the containers because they have nowhere to store them and they will be charged per diem fees on the chassis. Container lessors want the containers returned to terminals but terminals may not accept them and it’s not the BCOs responsibility to pay to have them returned in the first place. Normally that’s Hanjin’s job, but the company’s resources are likely to be focused on paying the cost of working ships and getting containers discharged.
   Maritime lien holders appear to be out of luck when it comes to arrests. According to attorney Stephen Simms, U.S. supplier liens are not recognized in Korea and lien holders are not entitled to secure claims in Korea bankruptcy court, but there still seems to be some contention on the latter issue.
   At the end of the hearing, Simms filed an emergency reconsideration motion with regard to the order’s effect on U.S. maritime lien holders. He believes the judge is mistaken in believing lien holders can submit “secure” claims in Korea and wants the order changed so they can receive payment for secured debt.
   Sherwood is making it clear, however, that in his eyes, the interests of the BCOs – and “keeping the stream of commerce moving” – have priority over maritime lien holders since the ships won’t come into port without a stay barring lien holders from arresting vessels.
   “The argument that is winning today is that the ships need to come in and discharge their cargo,” he said.
   The one exception to this may be the Hanjin Montevideo, the only vessel arrested before the interim provisional stay was issued on Tuesday, but the judge separated that into a separate issue.
   He encouraged Hanjin and the lien holders to work out a bond or letter of credit as “sufficient protection” for their claims.
   South Korea’s public international broadcaster KBS World Radio said, “The board of directors of Korean Air again failed to reach an agreement on Friday to provide 60 billion won (U.S. $54 million) to ailing Hanjin Shipping, further making it unclear whether the shipper will be able to receive a financial aid package pledged by Hanjin Group. The board agreed to reconvene Saturday to continue discussions on an aid package for the shipper that filed for court receivership last week.”
   Attorneys for shippers and service providers expressed concern about the delay in financing from Korea Air and complained several times that Hanjin hasn’t been nearly transparent enough about how continuing operations will be financed, especially since it appears cargo can’t and won’t move without it.
   KBS said, “Of the 100 billion won (U.S. $90 million) pledged by Hanjin Group, 60 billion will be loaned by Korean Air by holding its shares in the Long Beach Container Terminal in the U.S. operated by a Hanjin Shipping affiliate on collateral.”
   The remaining 40 billion won would come from the personal assets of Hanjin Group Chairman Cho Yang-ho, according to Yonhap News Agency.
   Yonhap said more than half of Hanjin’s fleet has been stranded at sea.
   Hanjin said in the hearing today it has $10 million in funding and court authorization to pay to unload at least four U.S. bound ships – the Hanjin Greece, Hanjin Boston, Hanjin Jungil and Hanjin Gdynia – provided BCOs paid their ocean freight and those ships will berth at their original destination.
   The 10,100-TEU Hanjin Greece, owned by Danaos, on Friday morning was drifting off the West Coast of Mexico, according to J. Kip Louttit, executive director of the Marine Exchange of California. In Mexico, the ship does not need to use low-sulfur fuel because Mexico is not part of the designation by the International Maritime Organization (IMO) Emissions Control Area (ECA) agreement requiring use of low sulfur fuel in U.S. waters.
   Louttit said the 7,471-TEU Hanjin Boston remains anchored outside Long Beach breakwater. “At 3 p.m. today, she is scheduled to move and anchor inside the Long Beach Breakwater, refuel, and return to anchor outside the breakwater about 24 hours later,” Louttit said. “The ship will be moved by a Long Beach Pilot (Jacobsen Pilot Service).” The reason the Hanjin Boston will be moved is for safety and to reduce the risk of an oil spill, Louttit explained.
   In a court filing yesterday, the Lanyard LLC, the Stamford, Conn-based owner of the Hanjin Boston, said that Hanjin Shipping had ignored requests to have the vessel refueled and just today refused the owner’s request to move the vessel so that it can be refueled. When the vessel runs out of the required fuel, it will be forced to either burn non-compliant fuel in violation of the international treaty, and federal and state laws; or go “dark,” shutting down all power, including power required for crew lodging and sanitation, minimal navigation, life-saving and fire-fighting equipment, and care and operation of refrigerated cargo containers.
   The 10,000-TEU Hanjin Jungil, owned by Seaspan, is west of San Francisco and was bound for Long Beach.
   The company-owned 4,275-TEU Hanjin Gdynia is west of Santa Barbara and was also headed to Long Beach.
   Louttit also said the Hanjin Montevideo remains at anchor inside the Long Beach Breakwater and is not scheduled to move.
   A Hyundai ship will leave Busan Saturday carrying 1,300 containers, mostly filled with products from Samsung Electronics and LG Electronics bound for Los Angeles, Yonhap reported.
   Meanwhile, a containership owned by Conti Shipping and managed by Reederi NSB was arrested and is being held off of Vancouver, according to Tradewinds.
   Reederei NSB said in a press release that in addition to the ship in Vancouver, it is managing six additional vessels chartered to Hanjin. The seven ships are “in waiting position on anchorage in different harbors until further proceeding has clarified,” Reederei NSB said.
   “Our nautical department is in permanent contact with the vessels,” the company added. “The crews are well cared of, their payment is regularly paid.”
   Yonhap said Choi Eun-young, former chairwoman of Hanjin Shipping, said Friday she is willing to offer her private assets to help Hanjin Shipping. She is the wife of the late Cho Su-ho, the younger brother of Hanjin chairman Cho Yang-ho. Cho Su-ho died in 2006 when he was serving as chairman of Hanjin Shipping.