On 27 May 2016, South Korea's STX Offshore & Shipbuilding Co. ("STX OS"), once the country's fourth-largest shipbuilding firm by revenue, filed for court-supervised rehabilitation, in the Seoul Central District Court.
I. Hanjin Shipping applies for 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?
South Korea’s Hanjin Shipping Co Ltd. filed for court receivership on Wednesday, August 31st in South Korea after losing the support of its banks, setting the stage for its assets to be frozen as West Coast ports deny access to its vessels. This recent development will have an immediate impact on a number of Buchalter’s clients, including manufacturers, retailers and asset based lenders.
We have all heard that the world is, once again, flat, given the importance of global trade and the interconnectivity of the supply chain. With Hanjin Shipping Co. Ltd. ("Hanjin"), South Korea's largest shipping company and the world's seventh largest container operator in terms of capacity, filing for receivership in connection with its bankruptcy proceeding in South Korea this week, new complications are appearing throughout the global supply chain.
I. The Bankruptcy Court’s commencement of rehabilitation proceedings and announcement of timetable
You may recognise the quote in the title from the film "Ron Burgundy – Anchorman" about our favourite newsreader from San Diego in the 80's. Of course he was talking about a street fight with news teams from other San Diego stations but could just as easily been talking about the seemingly sudden financial demise of the Hanjin shipping line.
On October 11, 2012, the Seoul Central District Court (“Court”) commenced reorganization proceedings against Woongjin Holdings, a holding company of Woongjin Group, under the Debtor Rehabilitation and Bankruptcy Act (“Bankruptcy Act”). As a result, various issues under the Bankruptcy Act related to the reorganization proceedings of Woongjin Holdings surfaced.
On October 11, 2012, the Seoul Central District Court ("Court") commenced reorganization proceedings against Kukdong Engineering & Construction Co., Ltd. ("Kukdong") under the Debtor Rehabilitation and Bankruptcy Act ("Bankruptcy Act").
Under the current Debtor Rehabilitation and Bankruptcy Act (“Debtor Rehabilitation Act”), even if a debtor’s debt is reduced or exempted when a rehabilitation plan is approved, this does not affect the debt of a guarantor who jointly bears certain obligations with such debtor (“Joint Guarantor”) (Debtor Rehabilitation Act, §250(2)).