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Creditors fear Hanjin sale of Long Beach terminal stake will leave them empty-handed

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NewsHubBy
Rachel Uranga , Long Beach Press Telegram
Posted:
01/17/17, 5:59 PM PST | Updated: 2 hrs ago
A U. S. bankruptcy judge in New Jersey is expected to decide Wednesday whether to approve the sale of Hanjin Shipping’s stake in a Long Beach terminal over objections from creditors who fear they will get shortchanged.
The South Korean company’s financial collapse on Aug. 31 threw international supply chains into chaos. As part of a worldwide effort to unload its assets , the seventh largest shipping company agreed to sell its 54 percent stake in Total Terminals International LLC for $78 million to Switzerland-based Mediterranean Shipping, the second largest shipping company. The agreement would release the company of $52 million in debt.
But the deal, already approved in a South Korean court and signed off in Long Beach in December, hit a bump in recent weeks after insurers and companies that lease cargo containers to shippers attempted to block the sale.
At the heart of the concern is fear that assets from the South Korean company’s sale of its stake will leave the United States and creditors empty handed.
The terminal company operates Pier T at the Port of Long Beach and Terminal 46 at the Port of Seattle. But it’s teetering on the brink of insolvency, according to court documents. Slowdown at the Long Beach terminal last year hit the port especially hard as cargo volumes plummeted after Hanjin’s fall.
Long Beach depends heavily on revenue from the lease to operate. About a quarter of the container cargo that passed through Long Beach last was handled at Pier T. But officials said they are not too worried.
“The agreements that we have made assume the sale is going to go forward,” said Long Beach Deputy City Attorney Charles Gale. “If it doesn’t go forward, it’s not clear what would happen.”
At the time of the sale, port officials welcomed the new owners, hopeful that it would open up the port for business once again.
But attorneys for the cargo container company, New Jersey-based Seacube Containers Ltd., argued in court documents that Hanjin didn’t conduct a fair auction to sell the terminal, and as a result failed to get a competitive price for the prime piece of real estate.
“It is clear the proposed sales price was not the highest and best offer received,” lawyers for Seacube stated in documents filed this month.
One unsuccessful bidder would have spent up to $147 million for the lease that runs though 2027, lawyers said.
But the biggest worry is that the sale proceeds will go to Korea, where they worry U. S. creditors won’t get the same protection.
With Total Terminals in deep financial distress, Hanjin and the terminal operators call the speedy sale of their assets necessary.
“A prompt sale to the purchasers will eliminate the imminent risk that TTI will run out of cash,” lawyers for Wells Fargo, a lender to TTI, said in documents.
Reach the author at ruranga@scng.com
or follow Rachel on Twitter: @racheluranga .

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