Bill Amos, who has a 25-year career representing banks in maritime legal cases, can breathe a sigh of relief now that the first of Brightoil Petroleum’s VLCCs has gone under the hammer in Hong Kong.
The High Court of Hong Kong sold the 320,000-dwt Brightoil Glory (built 2012) last week to Diamantis Diamantides’ Delta Tankers for just over $58m.
Amos, a partner at the Hong Kong office of legal firm Mayer Brown, acted for the vessel’s mortgagee bank. Although he declines to disclose the identity of his client, court records list Nord/LB as the arresting party.
Getting the ship to auction was no easy task, Amos tells TradeWinds.
“It was one of the most challenging ship finance workouts I have been involved in over the past 25 years,” he says.
The first challenge was getting the ship to Hong Kong so it could be arrested.
The vessel had been idle in Middle Eastern waters for several months when the bank decided to act.
“We ran a real risk of the vessel getting stuck in the Gulf, where it could have been detained by other creditors,” Amos explains.
“We had to use the bank’s security documents to take over the shipmanagement agreement in order to get in the driving seat.”
Crew wages and unpaid supplier bills also had to be settled to get the ship moving. Bunkering presented another problem.
“Going back into a port in the Middle East to take on bunkers would have exposed the ship to arrest. Instead we bunkered outside port limits off Colombo,” he says.
“We also had to make sure that it was kept in international waters while passing Singapore.”
The Brightoil Glory was arrested upon arrival in Hong Kong at the end of January. It had taken the bank and its lawyers around two months to get it there.
“To get the ship to Hong Kong it was very important that we worked closely with the shipmanagers,” Amos says.
Local ship repossession specialist Keith Martin of Sunscot was engaged in an advisory role.
But even once the tanker was in Hong Kong, the challenges continued.
Brightoil managed to block a March auction by claiming it was putting together a restructuring that involved a sale-and-leaseback deal for its entire fleet.
Amos describes this seemingly attractive prospect of the bank being paid out via a private sale as having dragged on for several months.
Brightoil’s appeal to have last week’s auction delayed by a further month was dismissed by two appellate court judges. While recognising that some progress appeared to have been made with the restructuring efforts, they said nothing binding had been signed and there was no guarantee that the proposed sales would go through.
The judges deemed it preferable to sell the VLCC via a court-ordered process, rather than through a private sale riddled with uncertainties.
Amos welcomed the decision. “It was a robust and commercial judgment that gives an affirmation of the rights of a ship mortgage. Without it, a bank holding a mortgage has no real security over the asset,” he says.
Amos notes that the judges also took into account the interests of potential bidders who spent time and money to come to inspect the vessel and arrange financing.
“The decision reinforces Hong Kong’s role as an admiralty court sale jurisdiction that can be relied upon,” he adds.
Brightoil is set to lose three more tankers next Tuesday, when a VLCC and an aframax will go under the hammer in Singapore, while another VLCC will be auctioned in South Korea.
