Tuesday, January 06, 2009
By Marcus Hand in Singapore - Tuesday 6 January 2009
MAJOR dry bulk shipping operator Armada (Singapore) is seeking protection from creditors while it restructures in the face of hundreds of millions of dollars worth of charterer defaults.
Armada (Singapore), which handles the capesize and panamax sector of the Armada Group, is seeking to restructure its business with its creditors under a Scheme of Arrangement under Section 210 of the Companies Act of Singapore.
The Scheme of Arrangement agreed by Singapore Courts today gives Armada eight weeks in which to come up with a repayment plan to its creditors, for the creditors to agree to it and for this be then approved by the courts in Singapore.
The company has also filed for a stay order in New York courts to prevent creditors taking action against it there while it restructures.
The US action has been taken under Chapter 15, a new chapter introduced in 2005.
While seeking to provide an internationally recognised cross-border platform to protect US assets, this chapter is also described as “the principal door” through which any potential future actions under Chapter 11 are to be brought.
If a full bankruptcy case is initiated later by a Chapter 15 petitioner, bankruptcy court jurisdiction is limited to the debtor’s assets in the US.
Industry sources said that there had been market talk in recent weeks that some creditors were looking to take action against the Singapore company as its financial position became increasingly shaky.
The company said it would not be able to fully meet its contractual obligations, forcing it to seek temporary protection.
Armada (Singapore) managing director Tommy Rathleff stressed that it was taking the action in effort to preserve its business and name, and remain a going concern that will be able to meet its obligations to creditors, rather than simply shutting up shop.
“We have achieved the best possible solution during this global economic crisis to guarantee our return to financial health,” said Mr Rathleff.
“We expect to create a viable and sensible plan that will provide a fundamentally sound groundwork for our business activities on a long-term basis.”
“We can see a lot of unrealised profits in this company that will be gone if Armada no longer exists,” he told Lloyd’s List. “The commitment to creditors is we fulfil the absolute maximum we can, rather than running away from our obligations.”
Unlike in the case of filing for bankruptcy under the scheme of arrangement Armada (Singapore) would remain a going concern, with its current management remaining in charge, rather than court appointed administrators.
Should Armada (Singapore) not be able to reach agreement with its creditors in the eight week period the dry bulk operator will be pushed into liquidation.
The move to seek protection from creditors is restricted to Armada’s Singapore operation as an independent corporate entity and does not affect other parts of the group.
“Unfortunately it is Armada (Singapore) that has been hit hardest by all these defaults,” Mr Rathleff said.
The Singapore operator has been hit by defaults from charterers running into hundreds of millions of dollars, including the well publicised default by Australian miner Fortescue Metals Group. This claim is understood to be worth in the region of $200m over the duration of contracts to 2014. It has a similar default worth around $170m with an unnamed Indian charterer.
The Singapore company also has paper losses on forward freight agreements in the region of $60m to $70m.
Armada Singapore has filed a total of 11 suits in the New York courts since late October. The parties involve include Atlas Shipping and Britannia Bulk both of which have already filed for bankruptcy.
The Singapore firm also has file against Cement Traders Inc; M/S Maheswari Brothers; Trimurti Global Impex; Kineta Minerals and Metals; Indagro Contractors; Glory Wealth Shipping Services; Pioneer Freight Futures; Transocean Grabulk Pool; and Ocean Line Holdings.
Meanwhile China Shipping Development (HK) filed against Armada (Singapore) on November 17.
Armada (Singapore) is the latest casualty of the crash in dry bulk shipping markets from record highs to record lows in less than six months in the second half of last year. Industrial Carriers, Britannia Bulk and Atlas Shipping all went bankrupt in the fourth quarter of 2008.
Armada (Singapore) was founded at the end of 2005, at the time effectively bringing onshore the activities of Armada Group.