Hong Kong's maritime community was weighing the impact on its operations after Sanko Steamship, Japan's fourth-largest shipping company, filed for bankruptcy protection yesterday, four months after trying to seek a deal with creditors.
The filing came 27 years after Sanko made a similar application, only emerging from a court-mandated reconstruction programme in 2000.
Wah Kwong Maritime Transport is among the shipowners affected by the problems at Sanko, while two other firms are also supplying crew and looking after the day-to-day running of several Sanko ships.
Wah Kwong owns a US$140 million supertanker, the 298,000 deadweight tonne (dwt) Trikwong Venture, in partnership with Sanko. The ship was delivered in January and chartered to Dalian Ocean Shipping, an offshoot of mainland shipping giant Cosco for five years.
The Cape Victory, a 177,934 dwt iron ore and coal carrier owned by Wah Kwong and Taiwan's U-Ming Marine Transport, is also on charter to Sanko for five years.
Asked about the impact on the company, Wah Kwong chief executive Tim Huxley said: 'It's too early to say ... No doubt more will emerge in the next few days. Our exposure is limited compared to others as we have a fairly diverse fleet of ships and portfolio of charterers.'
Chris Howse, a partner in Howse Williams Bowers, said the law firm was so far only acting on behalf of Wah Kwong over Sanko. 'I am busy trying to establish from Japanese lawyers and from Sanko's lawyers what the effect of this application for the Japanese equivalent of Chapter 11 bankruptcy is,' Howse said.
Sanko had estimated debts of US$2 billion when it filed for bankruptcy yesterday, a day before it was to seek creditors' approval for a restructuring plan.
The firm said it abandoned the revamp plan after several shipowners had Sanko's ships arrested over non-payment of charter payments. This came after the company initiated its own restructuring programme in March when it cut the amount it was paying in daily charter hire for ships it leased from other shipowners. While Sanko pledged to ultimately pay the full charter hire payments and some owners agreed to the cut, other shipowners withdrew their vessels from Sanko's fleet and took legal action to recover money owed.
Huxley and Howse thought the poor market conditions in the sector would worsen, bringing more failures. 'I would be very surprised if there are not more corporate failures amongst shipping companies and ship chartering companies in the coming months,' Howse said.
He said charter rates had fallen from US$200,000 per day during the boom four years ago to US$4,000 per day now. 'Charterers are re-negotiating rates as a result. Those companies that are too highly leveraged are unable to survive and each successive corporate failure places a greater strain on those that are still operating,' Howse added.