Another shipping case, In re Baytown
Navigation, Inc., et al., also ended in
confirmation of a liquidating plan with
the foreign-based secured lenders
ultimately having their collateral (the
ships) turned over to them. 14 The Greek-based debtor was unable to negotiate a
consensual restructuring with its secured
lenders and was forced to liquidate.
TMT appears to be following a path
similar to Baytown and MPS. Since the
court denied the motions to dismiss,
TMT has been embroiled in litigation
with its secured lenders. Several appeals
were filed and the District Court went
so far as to withdraw the reference of
the entire bankruptcy case for several
months. Motions to dismiss have been
re-urged, and several lift stay motions
have been filed by the secured lenders.
While the Bankruptcy Court ordered
mediation, that has not yet occurred,
and the prospect for a successful
mediated resolution in unclear. Absent
a consensual restructuring agreement
with its secured lenders, TMT may be
headed for the same fate as Baytown and
MPS—a failure to reorganize followed
by a controlled liquidation of its ships.
This is not to say that all foreign shipping
restructurings in the U.S. are doomed.
Several global shipping companies
have successfully reorganized recently
in Chapter 11. Shortly after MPS was
filed, General Maritime Corporation
Inc. and its affiliated companies
(collectively, GenMar), a Marshall Island
incorporated debtor, filed bankruptcy
in the Southern District of New
York. The results of this case stand
in stark contrast to those in MPS.
The day before filing bankruptcy,
GenMar entered into a restructuring
support agreement with its first lien
lenders and other secured creditors
to effectuate a restructuring. With
significant creditor constituencies on
board, the restructuring encountered
smooth sailing. In less than six months,
GenMar was able to confirm a plan
of reorganization that was accepted
by all voting classes of claims. 15
Similarly, Ireland-based TBS
International Limited and its affiliates
navigated bankruptcy without any
problems. TBS filed a prepackaged
plan of reorganization and disclosure
statement in February 2012 in the
Southern District of New York after
reaching restructuring agreements
with four separate lending groups.
The prepackaged plan consolidated
the four lending groups and
provided for payment of all general
unsecured claims in full. The plan
of reorganization in TBS’s case was
confirmed in less than two months.
Finally, Excel Maritime Carriers Ltd.,
a Greek shipping company, and its
affiliates filed for bankruptcy protection
in the Southern District of New York
last July. Like GenMar and TBS, Excel
had a plan support agreement in
place with its senior secured lenders
and filed a plan of reorganization
consistent with the agreement as
part of its first-day pleadings.
With the secured lenders on board,
Excel entered into mediation post-petition with the unsecured creditors’
committee and other parties to resolve
issues related to their proposed plan.
As a result of its efforts, Excel was able
to confirm a plan that was accepted
overwhelmingly by all voting classes
less than seven months after filing. 16
Two lessons can be learned from
recent bankruptcy filings in the U.S. by
foreign shipping companies. First, if the
foreign companies have de minimus
property in the U.S., such as retainers
held by their U.S.-based professionals,
courts will likely consider them eligible
to proceed in bankruptcy. Second,
while bankruptcy may provide an
initial breathing spell from creditors, it
cannot change the financial realities
faced by distressed shipping companies
or the current state of the market.
The shipping companies that have
experienced success in Chapter 11
each had a consensual restructuring in
place with their secured lenders prior to
filing. Those that have pursued free fall
bankruptcies, such as MPS, Baytown, and
TMT, have thus far found themselves
embroiled in costly litigation which, in
the cases of Baytown and MPS, resulted
in a failed reorganization followed by
a liquidation of the debtor’s assets. J
1 See, e.g., Tr. H’rg July 11, 2011, 14: 17 to 15: 6,
in In re Baytown Navigation, Inc. et al., Case
No. 11-35926 (Bankr. S.D. Tex. July 11, 2011).
2 U.S. Bankruptcy Courts have frequently found
that any amount of property in the U. S. is
sufficient to satisfy Section 109(a) and establish
jurisdiction in the U. S for a foreign company.
See In re Global Ocean Carriers, Ltd., 251 B.R.
31, 37-40 (Bankr. D. Del. 2000) (finding debtors
eligible where only property in U.S. was cash
of less than $100,000 in two bank accounts
and $400,000 held as retainer by counsel
to the debtors); In re Mc Tague, 198 B.R. 428,
431-32 (Bankr. W.D.N. Y. 1996) (finding $194 in
a bank account sufficient to satisfy Section
109(a)); In re Spanish Cay Co., Ltd., 161 B.R.
715, 721-22 (Bankr. S.D. Fla. 1993) (advertising
and marketing material, office equipment
and a bank account containing $100, was
sufficient property in the United States to
create eligibility to file bankruptcy); In re Globo
Comunicacoes e Participacoes S.A., 317 B.R.
235, 249 (Bankr. S. D. N. Y. 2004) (explaining that
Section 109(a) would be satisfied if claims that
the debtor-owned subsidiary that was U.S.
company and had a bank account in the U.S.
were substantiated); In re Iglesias, 226 B.R. 721,
722–23 (Bankr. S.D. Fla. 1998) (finding $500
in a bank account sufficient predicate under
Section 109 in an individual Chapter 7 case).
3 See Motion of the Royal Bank of Scotland PLC
Pursuant to 11 U.S.C. §§ 105(a), 362(d), 305(a),
and 1112(b) for Entry of Order (I)(A) Suspending
Chapter 11 Cases or Granting Relief from the
Automatic Stay and (B) Dismissing Chapter
11 Cases, or Alternatively, (II) Dismissing
Chapter 11 Cases or Granting Relief from
the Automatic Stay [Docket No. 120] in In
re Marco Polo Seatrade B.V., et al., Case No.
11-13634 (Bankr. S.D.N. Y. Sept. 12, 2011).
4 See Post-Trial Brief of Debtors and Debtors
in Possession [Docket No. 209] in In re
Marco Polo Seatrade B.V., et al., Case No.
11-13634 (Bankr. S.D.N. Y. Oct. 19, 2011).
5 Tr. H’rg. October 21, 2011, 488: 11-19 [Docket
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