ANNUAL LEGAL REVIEW:HANJIN BANKRUPTCY

Presented toHarbor Transportation Club

November 10, 2016 Presented by Cameron Roberts, Roberts & Kehagiaras LLP

THE LATEST▶ November 9th:▶ Around 95 percent of container ships owned by Hanjin have

completed cargo unloading.▶ Five of Hanjin’s vessels are still seized.▶ South Korean Ministry of Oceans and Fisheries said that 94

out of the carrier’s 97 boxships have completed cargo unloading. This represents 378,000 TEUs of a cargo total of 396,000 TEUs.

▶ Remaining vessels are expected to complete cargo unloading soon

▶ 771 crew members still on board Hanjin’s ships.See http://worldmaritimenews.com/archives/205998/report-hanjins-boxships-soon-to-complete-cargo-unloading-ops/

POLB & TTI ▶ November 4th, “We expect that as many as 3,000 containers will

literally be taken off the street and shipped back to Asia, with another 1,300 being removed from the Port, putting thousands of chassis back to work,” Noel Hacegaba, Managing Director of Commercial Operations and Chief Commercial Officer for the POLB.

See http://worldmaritimenews.com/archives/205728/polb-tti-to-clear-backlog-of-hanjin-empties

HANJIN’s CREDITORS▶ October 26th: Charter owners, terminal operators and

container lessors have been identified as the largest among Hanjin Shipping’s claim creditors, according to Alphaliner.

▶ Non-operating containership owner Seaspan tops the list of individual creditors with outstanding claims of KRW 46 billion (USD 41.6 million). Together with other containership owners identified by Alphaliner, total claims for unpaid charter hire and other related debt amounted to USD 229.5 million.

◾ See http://worldmaritimenews.com/archives/204972/alphaliner-charter-owners-top-hanjins-claim-creditors/

KOREAN DEVELOPMENT BANK▶ USD 45 million line of credit.

▶ “This is a temporary funding to get the cargo unloaded,” said Rahul Kapoor, a director at Drewry Financial Research Services Ltd. in Singapore. “As long as the ships are not unloaded, it’s adding up the bills for Hanjin. The longer this goes on, it’s going to get messier.”

▶ http://www.bloomberg.com/news/articles/2016-09-22/korean-lenders-said-to-consider-45-million-funding-for-hanjin-itdszjyw

THE LITERAL BIG PICTURETHE KOREA TIMES

http://www.koreatimes.co.kr/www/news/biz/2016/04/123_203385.html

31 AUGUST 2016RECEIVERSHIP/REHABILITATION

NEXT-DAY SERVICE

▶ 1 September 2016: Bankruptcy Division of the Seoul Central District Court accepted rehabilitation application.

▶ Rehabilitation is similar to Chapter 11 proceedings in the United States.

▶ Registration and adjudication of claims, followed by submission of draft rehabilitation plan.

MEANWHILE, BACK IN THE U.S. . . .

▶ Uncertainty.▶ Lawsuits: charter hire, garnishment, provision of bunkers.

CHAPTER 15 OF BANKRUPTCY CODE

▶ United Nations Commission on International Trade Law▶ Model Law on Cross-Border Insolvency▶ Objectives: recognition of foreign main proceeding, cooperation,

coordination, certainty

CHAPTER 15 PROCEEDING▶ Debtor files petition in U.S.

Bankruptcy Court for its recognition of a foreign bankruptcy case.

▶ Upon recognition, the debtor receives the benefits of U.S. bankruptcy law, including the “automatic stay,” which halts lawsuits and prevents creditors from seizing assets.

▶ Provides court with lists of litigation and interested parties in the U.S.

CHAPTER 15 BASICS

▶ Petition for recognition;▶ Notice to certain parties;▶ Recognition hearing, usually within about 30 days; and▶ No protection during that “gap period” unless the debtor gets

provisional relief.

HANJIN TIMING: TANDEM FAST-TRACK

▶ Fast-tracked in South Korea by one-day turn-around.

▶ Fast-tracked in U.S. by grant of provisional relief within five days of the filing of the Chapter 15 petition.

REHABILITATION ACTION

▶ Seoul Central District Court

▶ Sixth Bench of the Bankruptcy Division

TIMING IN REHABILITATION ACTION9/1 – 10/10 Hanjin submits list of creditors/amounts.

10/11 – 10/25 Creditors submit claims/amounts.

10/26 – 11/15 Hanjin admits or denies listed claims.

12/9 First meeting of interested parties.

12/23 Submission of reorganization plan or plans by Hanjin and creditors.

MAKING A CLAIM IN THE SOUTH KOREAN CASE

▶ Power of attorney.▶ Corporate nationality

certificate.▶ Supporting documents.▶ Notarized, apostilled,

and translated.▶ Distinguish between

pre-filing and post-filing debt.

▶ TIME-CONSUMING!

HANJIN BANKRUPTCYLocal Impact - Refusal of Empties

▶ Marine Terminal Operators refuse to accept Empties belonging to Hanjin▶ 10,000 to 15,0000 Hanjin containers accruing storage charges, on the ground

and on chassis.

DO YOU HAVE A PLAN TO DEAL WITH EMPTIES?

▶ Plan to address long term storage of Hanjin Empties is the only logical response

▶ MCs should organize into large groups to effectively manage the risks of storage and cost of litigation

▶ MCs should take the following four steps:

WHY DO I NEED A PLAN?▶ Hanjin or it’s creditors may seek ◦ Detention and Per Diem charges.◦ Locating and positioning costs.◦ Return of equipment to a different

port at YOUR expense.▶ Your customer may decide it will not

pay more to store the container than the book value of the container.

▶ The value of the container may be less than the cost of return or storage.

1. Confirm that Hanjin’s creditors cannot collect per diem, detention under the bill of lading, service contracts or other agreements.

A PLAN TO DEAL WITH EMPTIES

2. Establish carrier and storage liens that can be legally enforced.

A PLAN TO DEAL WITH EMPTIES

3. Confirm an agreed-to rate of storage and from whom storage can be collected.

A PLAN TO DEAL WITH EMPTIES

4. Consult with Korean counsel and consider filing a claim for storage in Seoul bankruptcy proceeding.

A PLAN TO DEAL WITH EMPTIES

5. Obtain relief from stay to permit a lien sale to salvage or scrap of container if the cost of storage exceeds the value of the empty container.

A PLAN TO DEAL WITH EMPTIES

▶ Insurance ◦ Exceptions for delay and carrier

insolvency?◦ Knew or should have known?

▶ OTI – NVOCC’s rushed in or out during Hanjin’s final days. E&O coverage?

▶ Dead Freight? ▶ Flexi-Van leases and insurance.▶ Reports of cargo moving from Chinese

ports in Asia to Busan for transshipping and loading to intended destination ports.

FINAL THOUGHTS

Cameron Roberts Roberts & Kehagiaras LLP

310-642-9800 ex. 7002www.tradeandcargo.com

Questions