A specialist in distressed assets has expressed interest in buying over some debts of troubled South Korean dry bulk shipping outfit Daebo International Shipping.
Robert Southey, co-founder of UK-based Trench Capital Partners, told IHS Maritime that his firm is contacting as many of Daebo’s creditors as possible.
Soon after the Baltic Dry Index fell to a historic low in February, Daebo filed for rehabilitation in South Korea that month, followed by a Chapter 15 filing in the United States in March.
The company’s total assets are worth KRW200.7 billion (USD175.7 million), while it has total debts of KRW307.7 billion.
Southey, who has been specialising in distressed loans and claims for around 10 years, said his firm which focuses exclusively on illiquid and distressed financial assets, has been trading the debts of Pan Ocean and bankrupt bunker trader OW Bunker.
Pan Ocean went into receivership in June 2013, but has since been acquired by a consortium comprising South Korean poultry processor Harim Group and private equity outfit JKL Partners.
Related news:South Korea’s Daebo ‘too valuable for liquidation’
Southey said, “We are looking to contact as many creditors as possible, but we understand it is unlikely that the top 10 creditors would sell. We haven’t set a limit for how much we will buy, but will review it ongoing.”
On 30 June, the Seoul Central District Court heard that Daebo’s worth as a continuing enterprise was KRW47.6 billion, as it has affreightment contracts with compatriot power utilities; accounting firm Deloitte Anjin calculated that Daebo’s liquidation value is KRW18.6 billion.
Notwithstanding Deloitte Anjin’s opinion, Southey acknowledged that his firm would be taking a risk as freight recovery is uncertain.
“Whether or not Daebo can recover from the dry bulk crisis is almost impossible to say, as market has not, according to most reports, scrapped enough tonnage to cope with reduced (cargo) volumes yet, and we do not yet know how the rehabilitation will finally take form,” said Southey.
“But I do believe that for investors that can withstand the illiquid nature of claims and more costly legal diligence in a transfer, buying claims can be a safer investment than bonds or equity of publicly traded shipping firms.”