By Mike Wackett
As nervous shippers and freight service providers await details of Yang Ming’s new investors, an analyst has questioned the value of THE Alliance’s bankruptcy contingency plan. Patrik Berglund, CEO and co-founder of ocean freight rate benchmarking and data analysts Xeneta, said today that, in practice, moving the distressed boxes of a bankrupt carrier “could completely overwhelm already badly confused east-west shipping schedules”.
On 9 March, THE Alliance completed the roll-out of its network and announced a “unique contingency plan” to safeguard shippers against the bankruptcy of a member carrier. The five members, Hapag-Lloyd, K Line. MOL, NYK and Yang Ming, have established an independent trustee to manage funds in the event of an insolvency within the group.
The plan followed reaction to the “incident last summer” – the failure of Hanjin Shipping – and said the trust fund would “safeguard that customers’ cargo on board the affected member’s ships will be carried to the port of destination”. THE Alliance boasted that it was the first contingency plan of its kind and was lauded for its initiative by, among others, the US Federal Maritime Commission.
The amount of the contingency fund has not been disclosed, but at a press conference in Hamburg last month, Chief Executive Rolf Habben Jansen said that the contribution by each of the five members would be “low double-digit millions” of dollars. In response, members of the other two alliances, 2M and Ocean, either declined to comment or, in the case of OOCL, said bankruptcy protection was unnecessary.
And Mr. Berglund suggested later that, regardless of the contingency plan, carriers would in practice look after their own interests first. “Low-priced boxes are being rolled-over repeatedly as higher-priced boxes are shipped in their place,” he said. “Which of THE Alliance carriers will drop their own paid cargo and take a slug of Yang Ming’s boxes without payment confirmation?”
And service providers such as ports, tugs, hauliers and feeder companies will also be keen to see Yang Ming’s liquidity position resolved as soon as possible, as will the shipowners and container leasing companies taking a big hit from the Hanjin bankruptcy. The final total of Hanjin creditors will not be revealed for months, or even years, but some estimates have put the figure at in excess of $20 billion. Overdue vessel charter hire and container leasing fees – especially the default on long-term contracts – will be a major contributor.
But during a first-quarter results presentation last week, Seaspan Corporation, which has entered a claim of $42 million against Hanjin, said it was “quite comfortable” with its counterparty Yang Ming, which has eight 14,000 TEU vessels on charter with 10-year hire periods.
Yang Ming’s shares resumed trading in the Taiwan Stock Exchange, after a two-week suspension. The embattled carrier said it expected to complete the second part of its recapitalization plan in June . Analysts have estimated that Yang Ming will require some $300 million to prevent it running out of cash. In a customer advisory, the carrier said it would then confirm the identities of “the investors who participated in this round of issuance, as well as the details of this offering”.
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk).