TOKYO One of Japan's oldest shipping firms, Sanko Steamship, filed for bankruptcy on Monday after months of battling with ship owners over the restructuring of $2 billion in debt, becoming the latest casualty of the four-year-old shipping industry downturn.
The dry bulk and tanker shipping firm, started in 1934, joins U.S.-based General Maritime Corp, the Containership Company, and South Korea's Korea Line in seeking bankruptcy protection amid rock bottom freight rates, an oversupply of vessels and high bunker fuel prices.
Sanko said it gave up the out-of-court settlement process it had pursued since March, and chose to seek protection from its creditors.
That was because it found itself in a severe cash flow problem as multiple ship owners retaliated against the rescheduling of charter fee payments by seizing Sanko-owned ships among others, the company said in a statement.
"We have reached a conclusion in light of our current circumstances that the best way of our reorganization is to file a petition for commencement of corporate reorganization proceedings," Sanko said.
Sanko said its current top management would serve as the administrator for the bankruptcy.
Credit researcher Tokyo Shoko Research said Sanko, which was restructured once before after filing for bankruptcy protection in 1985, had total debts of 155.8 billion yen ($1.95 billion).
"For the industry, this won't be a bad thing. Another major player is off the scene, which could help put the supply and demand balance in better order," said a Singapore-based ship broker.
"The problem is that the company's ships are still out there. It would be better if they were sent to be scrapped."
The Baltic Exchange's Dry Index .BADI, a benchmark for shipping, fell more than 40 percent in the first half of this year as a slowdown in Chinese demand and the euro debt crisis added to the industry's misery.
The Tokyo-based firm managed a fleet of 185 ships, which included 46 tankers and 27 dry bulk carriers, as of April 1, according to the company's website. Of that total, about 80 percent is hired from other firms.
"The tonnage Sanko has been trying to sell has been one of the factors depressing second-hand rates for dry bulk and tankers," said Janet Lewis, a shipping analyst at Macquarie Securities.
Bermuda-based Knightsbridge Tankers VLCCF.O, Japan's Nissen Kaiun, Norway's Golden Ocean GOGL.OL, Germany's Hellespont and E.R. Shiffahrt, were among the ship owners with vessels under charter with Sanko.
Knightsbridge and Athens-based Liquimar Tankers had one of Sanko's dry bulk vessels arrested at a U.S. port in May due to outstanding debts. ($1 = 79.7900 Japanese yen)
(Additional reporting by Randy Fabi in Singapore; Editing by Miral Fahmy)