Taiwan Maritime Transportation Co Ltd (TMT, 台灣海陸運輸), a bulk shipper and energy transportation firm, has led its 23 single-ship companies to file for Chapter 11 bankruptcy protection in the US federal court in Houston, the company said yesterday.
The company said seeking court assistance would help it proceed with its financial restructuring, but several banks in Taiwan — which are creditors of the US-based shipper — have seized the company’s ships as collateral, which could raise uncertainties about the company’s fate.
Chapter 11 filing places a company under temporary court administration, meaning it does not have pay off all its debts at once, allowing it to generate new revenue during its restructuring.
“By using the Chapter 11 provisions, there is now a breathing space of 18 months to restructure the company,” TMT chairman Nobu Su (蘇信吉) said in a statement the Taipei Times received yesterday.
TMT’s decision follows that of several other global shipping companies, such as General Maritime Corp and Overseas Shipholding Group, the statement said.
These companies are also under restructuring to get over impact of the global financial crisis in 2008, which has dragged down freight rates. TMT said it was no exception following the global economic slowdown of recent years.
TMT has recruited restructuring experts, including AlixPartners and Bracewell and Giuliani, to offer advice to TMT, Su said.
However, Taiwanese banks’ seizures of the company’s ships have blocked all chances of the company generating income, making it difficult to pay banks, wages to crew and to buy fuel, he said.
In the statement, Su called on assistance from the government to mediate the process of debt reorganization between TMT and its major creditors in Taiwan, adding that he met Ministry of Economic Affairs representatives earlier this week to discuss the matter.
For its major creditors in Taiwan, TMT’s bankruptcy filing could cause a spike in the nation’s non-performing loans this year, severely undermining the banking sector’s profitability.
Taiwanese banks have seen their non-performing loans increase by NT$5.7 billion (US$188.24 million) to NT$100 billion in April from a month earlier, mainly because of TMT’s bad debts, according to data provided by the Financial Supervisory Commission (FSC).
TMT did not disclose its debt position yesterday. Local media reports said the company’s total debt as of the end of April was about US$800 million.
First Commercial Bank (第一銀行) is the company’s largest creditor in Taiwan, with total loans of about US$120 million, followed by Mega International Commercial Bank (兆豐國際商銀) with US$96 million and Shanghai Commercial & Savings Bank (上海商業儲蓄銀行) with about US$80 million, the reports said.
TMT said the company has met with its major creditors in Taiwan several times, but failed to reach a consensus extending and restructuring debt.
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