Sanko Line Makes U.S. Bankruptcy Filing

Japanese shipping firm files for Chapter 15

Japan's Sanko Steamship Co., Ltd. (Sanko Line) have petitioned for Chapter 15 bankruptcy protection in the U.S., court papers filed at the United States Bankruptcy Court, Southern District of New York have shown.

Ship & Bunker reported yesterday the Japanese shipping company filed for bankruptcy in Tokyo after giving up on an out-of-court solution to what it described as "a severe cash flow problem."

The Chapter 15 filing will allow the company to protect its U.S. assets from creditors while recognising the Japanese entity is undergoing reorganisation proceedings.

The court papers showed Sanko Line had 596 creditors with claims totaling 155.8 billion yen ($1.95 billion) and said they had approximately 1.2 billion yen ($15 million) of cash on hand.

Consolidated net income for the fiscal year ended March 2012 was listed as a loss of 110,360 million yen ($1.4 billion).

In its petition, Sanko Line said it had observed a recovery of the dry bulk market which was due to economic expansion in China, so it retained a large number of vessels at a high rate of charter as it expected an early recovery of the shipping market as a whole.

When the market did not recover the company said it faced a "severe cash management problem" and was unable to borrow sufficient operating funds from financial institutions.

It was forced to sell 8 ships in FY 2009, 11 ships in FY 2010, and 22 ships in FY 2011, despite the market value of ships ordered in 2008 being 40% to 50% less when they were delivered in 2011.