The global shipping industry continues to navigate rough waters due to an increase in shipping supply and a decrease in shipping rates that continue month after month. With such economic conditions expected to continue for some time, many major players in the industry are succumbing to the distress and are choosing to avail themselves of the restructuring or insolvency laws of their home jurisdictions (often with parallel proceedings elsewhere in the world), but are now more commonly also exploring the debtor-friendly protections afforded to entities filing for bankruptcy under
Chapter 11 of the United States Bankruptcy Code.
Most, if not all, of these companies have undoubtedly had ongoing rounds of negotiations with their lenders, in an attempt to secure better loan terms for credit facilities that began in the past few years, often with non–traditional lenders that filled the credit vacuum created by the absence of more traditional lenders in the market. Facing limited options, these ship owners can attempt to secure new funding, renegotiate existing terms, or explore in-court restructuring or liquidation alternatives in their home jurisdictions or elsewhere. Realistically, the credit markets are providing fewer opportunities
for borrowers to restructure their debt, especially as borrowers’ slim equity cushions begin to erode. Further, after months or years of distress, lenders
have begun to take on more aggressive positions when negotiating with their borrowers—at times resulting in the voluntary turnover of assets. The last option for many such companies is exploring court supervised
liquidations or bankruptcy.
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