SC Lowy Korea Line Advisory and Debtor-in-Possession Financing
The shipping recession that began in 2009 hit global shipping companies hard. The first high-profile bankruptcy in Asia came in early 2011 as Korea Line, South Korea’s second-largest dry bulk player, defaulted on charterparty payments. Failing in attempts to negotiate a solution with counterparties outside of bankruptcy, it entered court receivership. But even in a court-appointed workout, restructuring talks with international counterparties ran into protracted difficulties, leading to breakdown and the threat of liquidation.
Identifying an opportunity, SC Lowy had entered the creditor negotiation process after buying a substantial portion of the shipping line’s distressed debt. As talks with common-benefit creditors broke down, SC Lowy stepped in as sole restructuring advisor, working with the company to analyze its financial and operational situation to create a sustainable plan.
SC Lowy then engaged in months of delicate negotiations with different classes of trade creditors in locations in Europe, Asia and the US that eventually led to the execution and settling of multiple charter claims. Simultaneously, SC Lowy structured an $85m Debtor-In-Possession (DIP) financing – the first of its kind in South Korea. The vital cash infusion provided working capital for Korea Line’s pared-down fleet to continue operation, but also convinced the shipping company’s range of creditors that the better option was to support restructuring rather than wasteful liquidation.
With its restructured finances and new cash resource, Korea Line could grow – and attract buyers. South Korean conglomerate SM Group bought a majority stake. That same year, Korea Line returned to profitability and began rebuilding its fleet. More recently, it has won lucrative long-term charter contracts to transport dry bulk to South Korea.
The Korea Line DIP financing was awarded Deal of the Year 2013 by the prestigious Atlas Turnaround Awards.