Hanjin Shipping - Korean Rehabilitation (Converted to Bankruptcy) Proceedings *Update*

We refer to our previous Industry News update dated 2 June 2017, relating to Hanjin Shipping.  By way of update, the Korean Court concluded that it was necessary for the Bankruptcy Trustee to disregard the Rehabilitation Receiver’s admissions / objections of claims in the rehabilitation proceedings and to inspect those claims again in the bankruptcy proceedings.  Following this review, on 31 July 2017 the Bankruptcy Trustee published a new list of acceptances / rejections of the claims. 

We understand that the Bankruptcy Trustee’s admissions / objections of claims are no different to those of the Rehabilitation Receiver’s; however, the Bankruptcy Trustee has applied the exchange rate prevailing at the time of the commencement of the bankruptcy proceedings, whereas the Rehabilitation Receiver had applied the exchange rate prevailing at the commencement of the rehabilitation proceedings.  Therefore, whilst there does not seem to be any substantive changes in the reasons for acceptance / rejection of claims, the overall dollar amounts admitted / rejected may have changed.

If Members have a claim which has been accepted in full by the Bankruptcy Trustee, then there is no need to take further steps.  However, if a claim has been rejected by the Bankruptcy Trustee, then there is a deadline of 21 August 2017 for Confirmatory Proceedings to be commenced.  Where a claim has been partially accepted and partially rejected, it is not yet clear whether Confirmatory Proceedings need to be commenced in respect of the entire claim (local law advice will need to be taken). 

We recommend that Members discuss any claims they may have with their usual FD&D case-handler.

With thanks to Choi & Kim who contributed the above information to the Club’s FD&D Department.

2 June – Update

We refer to our previous Industry News update dated 17 February 2017, relating to Hanjin Shipping.  The First Creditors’ Meeting was held on 1 June 2017 at which the Bankruptcy Trustee reported on the status of Hanjin in the bankruptcy proceedings, summarised as follows:

• The financial statement submitted by Hanjin showed total assets (as of 31 December 2015) of about KRW 1,477 billion.  This amount includes assets held / charged to secured creditors.  The assets which are not charged to secured creditors have been evaluated at about KRW 307 billion.

• In the preceding rehabilitation proceedings, rehabilitation claims in the aggregate sum of about KRW 3,405 billion have been admitted (considered as bankruptcy claims in the bankruptcy proceedings) and common benefit claims in the aggregate sum of about KRW 163 billion have also been admitted (considered as estate claims in the bankruptcy proceedings).

• Further, since the commencement of the bankruptcy proceedings, claims totalling about KRW 12,389 billion have also been registered / freshly examined.  It is possible that there are other unconfirmed / unregistered claims.

• It is still too early to estimate a recovery rate for the bankruptcy claims.  An estate claim has priority over a bankruptcy claim under Korean law, meaning that once all the estate claims are paid, any balance in Hanjin’s estate will be distributed amongst the bankruptcy claims on a pro-rata basis.  Taking into account the value of the remaining assets of Hanjin and the value of the estate and bankruptcy claims, it is anticipated that the recovery rate will not be greater than 1%.

With special thanks to Choi & Kim who contributed the above information to the Club’s FD&D Department.

17 February – Update

We refer to our previous Industry News update dated 3 February 2017, relating to Hanjin Shipping.  The Seoul Central District Court has today (17 February 2017) converted the rehabilitation proceeding into a bankruptcy proceeding and has appointed a Bankruptcy Trustee, Jin Han Kim, to dispose of Hanjin Shipping’s remaining assets and distribute the proceeds to the creditors, according to their priorities. 

The deadline to register claims in the bankruptcy proceedings is set for 1 May 2017 and the First Meeting of Interested Parties is scheduled for 1 June 2017.  For the majority of creditors who have filed their claims in the rehabilitation proceedings, they will not need to file their claims again in the bankruptcy proceedings.  However, as set out in our Industry News Update dated 3 February 2017, Members should note that:

• If claims have been filed in a foreign currency, then a confirmatory action in respect of such claims will have to be filed again in the bankruptcy proceeding (as confirmatory actions involving such claims in the rehabilitation proceeding will not automatically be deemed as confirmatory actions in the bankruptcy proceedings). 
• If claims are not included in the list of claims accepted by the receiver in the rehabilitation proceeding, then they may be denied by the Bankruptcy Trustee and the creditor will need to file a confirmatory action again. 
• Common benefit claims will be treated as estate claims in the bankruptcy proceedings, which have priority over other general claims and it is recommended that a demand for payment be made upon the Bankruptcy Trustee at least to highlight the existence of the claims. 

In addition, secured creditors are not stayed from exercising their security interests in the bankruptcy proceedings.  This means that secured creditors will have priority of repayment (insofar as the repayment is from the proceeds from the sale of their collateral, up to the amount of their security interest).

We recommend that Members discuss any claims they may have with their usual FD&D case-handler.

3 February 2017

We refer to our previous Industry News update dated 14 December 2016, relating to Hanjin Shipping.  Since that update, the Seoul Central District Court has given notice (on 2 February 2017) of its decision to discontinue the rehabilitation proceedings of Hanjin Shipping.  The reason given by the Court is that Hanjin Shipping’s liquidated value is greater than its value as a going concern.

The Court’s decision to discontinue the rehabilitation proceedings will become final should no objection be filed by an interested party within 14 days of the date of the decision.  If no objection is made within that period, then the rehabilitation proceedings will be formally discontinued as of 17 February 2017.  However, if any objection is filed during the objection period then the effective date of discontinuation will be postponed pending the Court’s review of whether or not the rehabilitation proceedings should be discontinued.

It is anticipated that once the discontinuation of the rehabilitation proceeding become effective, the Court may declare bankruptcy (converting the rehabilitation proceeding to a bankruptcy proceeding).  If this happens, the Court will appoint a trustee to dispose of Hanjin Shipping’s remaining assets and distribute the proceeds from the sale of those assets to Hanjin Shipping’s creditors.

Potential Conversion of Rehabilitation Proceeding to Bankruptcy Proceeding

If the Court does convert the rehabilitation proceeding to a bankruptcy proceeding, creditors who have filed their claims in the rehabilitation proceeding will not need to file their claims again as such claims will be deemed as bankruptcy claims filed under the bankruptcy proceeding.  However, Members should note as follows:

• If claims have been filed in a foreign currency, then a confirmatory action in respect of such claims will have to be filed again in the bankruptcy proceeding (as confirmatory actions involving such claims in the rehabilitation proceeding will not automatically be deemed as confirmatory actions in the bankruptcy proceedings). 
• If claims are not included in the list of claims accepted by the receiver in the rehabilitation proceeding, then they may be denied by the trustee and the creditor will need to file a confirmatory action again. 
• Common benefit claims will be treated as estate claims in the bankruptcy proceedings, which have priority over other claims. 

Separate Bankruptcy Proceeding

In the event that the Court does not convert the rehabilitation proceeding into a bankruptcy proceeding, Hanjin Shipping’s creditors could still seek to have it declared bankrupt.  In that case, all creditors would need to file their claims again in order to participate in any distribution from the bankruptcy estate. 

In summary, the current position of the rehabilitation proceedings remains rather fluid and we therefore recommend that Members discuss any claims they may have with their usual FD&D case-handler.

14 December 2016

We refer to our previous Industry News update dated 16 November 2016, relating to Hanjin Shipping. Since that update, the court-appointed Receiver of Hanjin Shipping has on 5 December 2016 published his decision on affirming/rejecting the various general rehabilitation claims filed in the rehabilitation proceedings.

For Members whose filed claims have been accepted/affirmed in whole, there is no immediate need to take any further steps in the rehabilitation proceedings.  If a rehabilitation plan is approved for implementation later in the proceedings, the admitted claim will be included in the rehabilitation plan and considered for payment/compensation pursuant to the terms of the plan.

Members should note that for those general rehabilitation creditors whose filed claims have been partially / wholly rejected by the Receiver, the deadline for filing of Confirmatory Proceedings is 5 January 2017.  As a matter of Korean law, if Members do not commence the Confirmatory Proceedings, their claims will be confirmed in accordance with what is stated in the Table of Admission / Rejection and Members’ right to purse the rejected portion will be lost. 

In the meantime, an interim meeting for interested parties in relation to the Hanjin rehabilitation was held on 9 December 2016, and we have received reports from various Korean lawyers on the same.  At the meeting, Hanjin’s Court-appointed Receiver provided an update on the state of the rehabilitation process.  Samil PwC, the inspectors appointed in the rehabilitation proceedings, also gave a presentation and their report was due to be submitted to the Korean Court on 12 December 2016.

Samil PwC’s report concluded that there were significant difficulties in order to revive Hanjin’s liner business and their approach has been to sell off the company’s major assets to avoid further depreciation in the value of the assets.  In light of Samil PWC’s report, there is a likelihood that the rehabilitation proceedings may be converted into a liquidation proceeding by the Korean Court.  

The next step in the rehabilitation proceedings is the First Meeting of Interested Parties, which is currently scheduled for 13 January 2017.  

The current position on the fate of the rehabilitation proceedings is, therefore, quite fluid, and we recommend that Members discuss any claims they may have with their usual FD&D case-handler.

16 November 2016

We refer to our previous Industry News update dated 12 September 2016, relating to Hanjin Shipping.

The receiver in the Korean rehabilitation proceedings applied for a change to the schedule, which the Bankrutpcy Court has granted.  Members should note that the schedule of key dates has been revised as below:

26 October to 5 December 2016 (previously 26 October to 15 November 2016)

       Review of creditors’ claims report by the receiver

                14:00 hours on13 January 2017 (previously 14:00 hours on 9 December 2016)

                First meeting of interested parties

                3 February 2017 (previously 23 December 2016)

                Deadline for submission of draft rehabilitation plan

Whether the claims filed have been accepted or rejected by the receiver is, therefore, anticipated to be known by 5 December 2016.

Members should now be aware that the final absolute deadline for any supplementary filing will be 3 February 2017 (when the second meeting of the interested parties is anticipated to be held).

We have also been advised that the US Bankruptcy Court in New Jersey has set a hearing for 22 November 2016 to decide whether it should grant a final order for the recognition of the Korean bankruptcy court’s Rehabilitation order

12 September 2016

We refer to our previous Industry News update dated 2 September 2016, relating to Hanjin Shipping.

Today, 12 September 2016, the Seoul Central District Court has revised the timetable for steps to be taken in the rehabilitation proceedings, as follows:

10 October 2016
Deadline for the receiver to submit the list of recognised claims (secured and unsecured) to the Seoul Central District Court.

25 October 2016
Deadline for any creditor or shareholder to file secured claims, unsecured claims and shares (to be submitted to the Court along with supporting evidence).

25 October to 15 November 2016
Period for the review of the creditors’ filed claims by the receiver / other creditors – any objections to those claims to be filed by 15 November.

Of particular note for Members at this stage, is the fact that the deadline for reporting their claims to the Seoul Central District Court has been extended from 4 October to 25 October 2016.

Members who require assistance with filing their claims against Hanjin Shipping should contact the Club’s FD&D department for assistance.

2 September 2016

As many Members will already be aware, rehabilitation proceedings of Hanjin Shipping Co. Ltd. were commenced on 1 September 2016 by the Seoul Central District Court.  Mr Tae-Soo Seok, CEO of Hanjin, has been appointed as the receiver.  

Of particular note for Members at this stage are the following key dates:

19 September 2016
Deadline for the receiver to submit the list of recognised claims (secured and unsecured) to the Seoul Central District Court.

20 September to 4 October 2016
Period for any creditor or shareholder to report secured claims, unsecured claims and shares (to be submitted along with supporting evidence).

5 October to 18 October 2016
Period for the review of the creditors’ filed claims by the receiver / other creditors.

We would particularly draw to Members’ attention the deadline of 4 October 2016 for reporting claims to the Seoul Central District Court (together with supporting evidence). 

We refer to our previous Industry News update dated 12 September 2016, relating to Hanjin Shipping.
The receiver in the Korean rehabilitation proceedings applied for a change to the schedule, which the Bankrutpcy Court has granted.  Members should note that the schedule of key dates has been revised as below:
26 October to 5 December 2016 (previously 26 October to 15 November 2016)
Review of creditors’ claims report by the receiver

    14:00 hours on 13 January 2017 (previously 14:00 hours on 9 December 2016)
    First meeting of interested parties

    3 February 2017 (previously 23 December 2016)
    Deadline for submission of draft rehabilitation plan

Whether the claims filed have been accepted or rejected by the receiver is, therefore, anticipated to be known by 5 December 2016.
Members should now be aware that the final absolute deadline for any supplementary filing will be 3 February 2017 (when the second meeting of the interested parties is anticipated to be held).
We have also been advised that the US Bankruptcy Court in New Jersey has set a hearing for 22 November 2016 to decide whether it should grant a final order for the recognition of the Korean bankruptcy court’s Rehabilitation order