To anyone practicing bankruptcy law more than a month, the scenario of a lender secured by a lien against real property, as well as an assignment of rents (“AOR”) is pretty standard fare. Default on the debt occurs, threats (and counter threats) are tossed about, notices of foreclosure are filed (and perhaps receivership proceedings were begun), and the borrower files the inevitable bankruptcy proceeding where all is stayed to be dealt with under the watchful eye of the bankruptcy court.

It has been just over two months since one of South Korea's largest shipowners and operators, Hanjin Shipping Co Ltd (“Hanjin”), applied for court rehabilitation. On 1 September 2016, the Bankruptcy Division 6 of the Seoul Central District Court (the “court”) issued a decision accepting that application and commencing rehabilitation proceedings.

As you may be aware, one of South Korea's largest shipowners, Hanjin Shipping Co Ltd (“Hanjin”), has applied for court rehabilitation in Korea. On 1 September 2016 the Seoul Central District Court (Bankruptcy Division 6) issued a decision accepting that application and commencing rehabilitation proceedings.

Based on our experience in dealing with recent rehabilitations involving the Korean shipping industry and working closely with Korean lawyers, we set out below a few guidance points.

What is a Korean Court Rehabilitation?

Pension issues in the American Airlines (AMR) bankruptcy¹ have resulted in the Internal Revenue Service (IRS) issuing new final regulations, effective November 8, 2012 (Final Regulations), which broadly impact all debtors facing underfunded pension plan obligations. The Final Regulations provide chapter 11 bankruptcy debtors facing distress terminations of their tax-qualified defined benefit pension plans with the additional option of amending the plans to eliminate accelerated payment options.

The US Supreme Court has ruled in Stern v. Marshall (June 23, 2011) that a bankruptcy court lacks jurisdiction to render final judgment on a bankruptcy estate’s compulsory counterclaim against a creditor arising under common law, despite a statutory grant of jurisdiction.