Hanjin Shipping’s New Jersey bankruptcy filing has yet to calm chaos across the US, as a swathe of creditors from all walks of the maritime industry urged a judge not to rush to recognise fully the operator’s South Korean court proceedings without greater measures to sort out the tangle. Detractors of the company’s restructuring filing included shippers, bunker suppliers, terminal operators, container lessors, tug owners, rail companies and chassis lessors expressing doubts about how their rights to collect on past debts will be protected and how to ensure they will be paid for services provided as Hanjin ships float out of limbo.

And before US Bankruptcy Judge John Sherwood entered an order on Tuesday night putting a freeze on litigation, as is standard procedure in Chapter 15 petitions to recognise foreign bankruptcies, the litigation against Hanjin grew. At least nine lawsuits by six plaintiffs are on public dockets in US courts and at least two arrest orders have been issued against Hanjin vessels. But the allegations in those cases pale in comparison to the potential claims that some creditors disclosed in a hearing this week in the US Bankruptcy Court in Newark, New Jersey.

An estimated 15 ships are waiting in limbo off the US coast, either to avoid arrest or because ports will not let them enter as long as there are doubts about Hanjin’s ability to pay its bills. In the bankruptcy case, terminal operators have complained that they are saddled with Hanjin containers that they cannot move, and they asked Sherwood for protections to ensure suppliers will be paid once the idled vessels move to a berth to unload. Even lawyers for Total Terminals International (TTI), a joint venture that has Hanjin as its largest shareholder, complained that there are no provisions in the ship operator’s Chapter 15 bankruptcy filing that deal with the process for discharging these vessels. “This lack of a short-term plan for these vessels will lead to mayhem,” wrote the company’s lawyers, led by Douglas Deutsch of Clifford Chance. In the packed courtroom, he said Hanjin is $50m behind on its payments to the terminal operator, which is no longer accepting the Korean shipping giant’s cargoes.

Hanjin’s lawyer, Ilana Volkov of New Jersey firm Cole Schotz, said Hanjin is aware that service providers will need confidence that they will be paid but added that the company is seeking the litigation freeze as a first step in the process. “Everybody is working around the clock to secure the funds for this international operation to continue,” said the lawyer.
Shippers, meanwhile, complained that hundreds of millions of dollars-worth of cargo is stuck on Hanjin vessels.

Lawyers for computer maker HP proposed establishing protocol in the bankruptcy to turn over containers to cargo owners and said the company would be willing to put money into a trust fund to pay for the effort. Other cargo interests expressed approval of the protocol. “HP faces the prospect of loss of customers, business reputation, market share and other irreparable harm,” wrote the company’s lawyers at Pachulski, Stang, Ziehl & Jones. “This is especially the case because the potential for any recovery of damages from the foreign debtor, who is currently insolvent, may be remote at best.” Other cargo interests complained that in some cases Hanjin has refused to turn over containers.

Simms Showers lawyer Stephen Simms, who is representing several bunker suppliers, tug owners and container lessors, urged Sherwood to safeguard his clients’ maritime liens against Hanjin ships by ensuring that his ultimate order does not allow the ship operator to take vessels to jurisdictions where the US protections would not apply. “That wipes out our security entirely,” he said. Simms told the judge that one client, bunker supplier OceanConnect, has secured an arrest order against the Hanjin-chartered, 4,590-teu Seaspan Efficiency (built 2003) over $837,000 in unpaid bills and it has filed papers to intervene in World Fuel Services’ arrest of the 4,250-teu Hanjin Montevideo (built 2010). Sherwood responded by ordering Hanjin not to take its ships away from US waters until he can consider the maritime lien arguments.

Shipowners, meanwhile, have been without charter hire from Hanjin for months, legal and security filings reveal. As TradeWinds has reported, an affiliate of Idan Ofer’s Eastern Pacific Shipping, for example, has filed lawsuits in California and Illinois over $1.38m in unpaid charter hire for the 3,670-teu Hanjin New Jersey (built 2013). And brother Eyal Ofer’s Zodiac Maritime has filed three lawsuits in California and Baltimore over $1.69m allegedly owed on the 3,670-teu Hanjin Louisiana (built 2013) after charter payments stopped at the end of June. New York-listed Danaos has told the US Securities & Exchange Commission (SEC) that Hanjin was behind on $16.9m as of the end of June, while rival Seaspan had $18.6m in unpaid Hanjin charter hire as of 18 August.

As TradeWinds has reported, Hanjin filed for court-supervised restructuring in Seoul last week with some KRW 6.03 trillion ($5.04bn) in total liabilities and KRW 6.62 trillion in assets. The three-judge panel, which approved commencement of the company’s rehabilitation proceedings, noted that Hanjin faces some KRW 3.14 trillion in loans maturing within one year but no possible way to pay it off.