Distressed shippers warned that fight to stay afloat can sink them

摘要

Shipping lenders were warned against entering long restructuring negotiations by panelists speaking at Marine Money Week's 27th Annual Conference in New York last Tuesday. Restructurings are rarely straightforward, but shipping deals present unique challenges for creditors. Bankruptcy casts doubts on borrowers' operations, which quickly translate into a hit to the bottom line as customers look elsewhere for ship charters to transport cargo. "It is so easy in Chapter 11 to get excited to fight but there is reputational damage and negative charter implications for the company and lenders are paying fees without receiving interest," said Evan Flaschen, chair of the financial restructuring group at Bracewell & Giuliani. "There are winners in Chapter 11. The lawyers win, and new investors who come in with a debtor-in-possession loan at very healthy rates and equity when the lenders get tired." To avoid big debt writedowns for lenders and fee payments that come out of their collateral, Flaschen recommended cutting restructuring deals early.