Failing shipping lines run to US bankruptcy courts to keep functioning
2012 04 06
- Details
FAILING shipping companies, struggling with an oversupply of tonnage and slack demand, are increasingly filing for bankruptcy in the United States because the US law protects them from liquidation, allowing them to continue operations, say lenders and lawyers, according to Reuters.
"Only in Chapter 11 can you get bankruptcy financing, can your management remain in place, and can you continue to operate the company," said DLA Piper bankruptcy lawyer Thomas Califano.
When Dutch-based Marco Polo Seatrade filed for bankruptcy in a US court in July, lenders fought to get the case thrown out as the company's links to the United States were limited to two small bank accounts.
Shipping companies are well placed to do what many other troubled firms would like to do - seeking Chapter 11 refuge - because their assets of ships are on the move, allowing them seek insolvency protection almost anywhere they go.
Creditors, most often European banks, as well as lawyers and judges raise questions about the rightful reach of US bankruptcy law and who should have access to US courts. So far, American judges have handled such cases. Lenders would prefer to push companies into insolvency so they can seize assets.
Chapter 11 offers broad protections to stave off creditors and give companies an exclusive period to file restructuring plans. It differs from Chapter 15, which allows foreign restructurings to be recognised in the United States, but does not give companies the same leeway in reorganising.
Source Shipping Gazette - Daily Shipping News
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