USA fuel company World Fuel Services has seized Hanjin Xiamen, even though the vessel was docked in the South Korean port of Changwon, South Gyeongsang.
Hanjin Shipping filed a court appeal on Monday against the seizure, which took place at the weekend. A South Korean court has given Hanjin protection against vessel seizure, but World Fuel Services has argued that the Hanjin Xiamen was only “beneficially owned” by Hanjin Shipping, having been “borrowed” from a special purpose entity based in Panama. As such, claims WFS, Hanjin Xiamen should not be considered a Hanjin Shipping asset. Hanjin Shipping owes WFS for fuel.
The result of the appeal is expected on Thursday. The bankruptcy court that prohibited the seizure of “Hanjin assets” did not specifically include assets held via a special purpose entity. However, Korean shipping companies often establish such vehicles (SPVs) to help finance the purchase of a new vessel. They “borrow” the vessel from the SPV until it is completely paid for.
A local court in Changwon interpreted the protection order unusually narrowly, and ruled that the ship did not belong to Hanjin Shipping, but to the paper company in Panama. In Singapore a similar protection order included beneficially owned vessels.
A problem for Hanjin is that the purchase of most of its vessels was financed through such SPVs, which makes the court’s decision later this week significant for the shipping company and its various creditors.