Korean Court discontinues Hanjin rehabilitation proceedings
Whilst the headline might over-dramatise the situation, as the conclusion of the Hanjin Shipping (Hanjin) collapse is still some way off, it does illustrate that the Hanjin situation has taken a significant step in that direction.
On 2 February 2017, the Seoul Central District Court ordered that the Hanjin rehabilitation proceedings should be discontinued. Given the scale of the Hanjin collapse, as referred to in our previous article; Hanjin rehabilitation – update and revised timetable the Court’s decision will not be a surprise.
The reason provided for the Court’s decision in the court order of 2 February was as follows:
“The Debtor’s rehabilitation proceeding shall be discontinued pursuant to Article 286(2) of the Debtor Rehabilitation and Bankruptcy Act as it is palpable that the Debtors liquidation value exceeds its growing concern value.”
As a result, there will be no phoenix rising from the flames, as the biggest shipping collapse in modern times, if not ever, takes the route that many expected that it ultimately would. After the passing of the initial deadline on 25 October, the claims submitted to the Korean rehabilitation proceedings amounted to just over US$800 million, comprised of almost 3,000 creditors. There were, no doubt, many more still waiting in the wings.
Over the past few months Hanjin's assets have been dissipated and it has become clear that, even with the injection of cash from the Korean government and Hanjin’s majority shareholders, there would not be enough to save the company.
With the court having now ordered the discontinuance of the rehabilitation proceedings, there is a 14 day period within which an interested party can appeal the Court’s decision. It is however considered highly unlikely that there will be any such appeal. That being the case, the discontinuance of the rehabilitation proceedings will take effect from 17 February 2017. It is likely that the present rehabilitation proceedings (which have the purpose of saving the company) will be transferred to bankruptcy proceedings (which will have purpose of liquidating the company). We understand that any proceedings which have already been filed in the rehabilitation proceedings will be transferred automatically over to the bankruptcy proceedings and so separate filing will not be necessary.
This development will not come as a surprise to many and will slowly lead to some closure on this significant impact on the marine industry.
We will continue to closely monitor the Hanjin situation.