Hanjin and the “Titanic Effect”
Firm Principal Steve Simms recently explained the latest challenge facing the maritime industry – the insolvency of the world’s seventh largest container line, Hanjin. Following the arrest of the HANJIN PARADIP in Durban in May, 2016, many still believed that a Hanjin insolvency was impossible because they thought it was too big to fail. This phenomenon has been termed the “Titanic Effect,” and in the Hanjin insolvency, it involved a failure to take cues from competitors and others in the maritime world to plan for the inevitable Hanjin bankruptcy. Shippers received plenty of clues from Hanjin’s increasing debt levels, which would have made the announcement of Hanjin’s insolvency in September 2016 very predictable. Hanjin had accumulated an impressive amount of unpaid charters by that point.
For any creditors of Hanjin looking to be as proactive as possible in this situation, they should be ready to accelerate accounts immediately (subject to any restraining / insolvency orders), apply funds received to non-arrestable amounts, track vessels to favorable arrest jurisdictions, attach receivables otherwise due Hanjin, put owners of ex-Hanjin vessels and their P&I clubs on notice of your claims, assess possible insolvency voidable preference claims and defenses, and check with your credit insurer to see whether it changed policies because of the Hanjin insolvency.
In addition, bunker and marine service providers should be looking to their current operations and asking when the next “unthinkable” situation may occur. This means closely monitoring credit lines to see which customers are beginning to max out and monitoring a variety of sources in the industry for information about your customers and their competitors. The lesson to be learned here is that the more intensely you believe your business and the way that you do it cannot fail, the less your business will be able not only to survive but revive after the next certain-to-come “unthinkable event.”
If you are interested in reading more about how the maritime industry is reacting in the wake of the post Hanjin insolvency, a full version of the article is available here. For information and advice on how your business can develop a strategy for collecting on debts owed by Hanjin or preparing for the next major insolvency in the industry, contact Steve Simms.
