Hanjin Bankruptcy Saddles Trucking Fleets With Widespread Losses, Executives Say
This story appears in the Sept. 12 print edition of Transport Topics.
Trucking companies are grappling with the financial fallout from the bankruptcy of Hanjin Shipping Co., unsure about whether they can collect on unpaid bills.
Hanjin’s bankruptcy protections from its South Korean proceedings were recognized in the United States by a federal court in Newark, New Jersey, on Sept. 6, preventing carriers from filing separate lawsuits in courts across the country. Instead, they will need to file a claim with the bankruptcy court for unpaid bills. Hanjin, based in Seoul, initially applied for court receivership Aug. 31 after lenders rejected a restructuring proposal. It has more than 6 trillion won ($5.5 billion) in debt.
According to Craig Helmreich, a partner at Scopelitis, Garvin, Light, Hanson & Feary, up to two years could pass before any company gets reimbursed, and it will be only a fraction of the debt.
“An unsecured creditor, like a dray carrier, is unlikely to see more than 10 or 15 cents on the dollar, if anything, in a bankruptcy like this one,” he said. That means, though owed much more, they may not collect any more than $1 million.
For example, Hanjin owes IMC Cos. a seven-figure sum for work over the past 90 days, according to President Mason George. IMC and other national carriers such as RoadOne IntermodaLogistics and the Evans Network of Cos. could lose between $100,000 and $850,000, according to figures from the executives and Helmreich. Each generates between $150 million and $460 million in revenue per year.
“Hanjin used the money it owed us for drayage to cash flow their ocean losses. Now, we’re stuck piecing this together and suffering the consequences,” George said. “We’ll definitely live to fight another day, and I guess we’ll take it on the chin.”
RoadOne President Ken Kellaway said, “It’s frustrating, because we work on very small margins. We’ve had to pay the driver for the work already. So anytime you take these types of write-offs, it has a big impact.”
But Benjamin Hartford, an analyst with Robert W. Baird & Co., doesn’t believe there will be a significant long-term impact.
“You’ll see some modest write-downs from [unpaid bills], but it’ll be offset by some [paid bills]. The impact directly to the publicly traded companies that have intermodal-drayage exposure will be fairly negligible,” he said.
However Fernando Rodrigues, who operates TMX Intermodal with 60 drayage trucks serving the Port of New York and New Jersey, believes some small carriers could go under. “There are companies in our area that were doing direct work for Hanjin and are definitely hurting right now,” he said.
“There are no winners here, only losers,” said Tom Adamski, chairman of the intermodal council at the New Jersey Motor Truck Association. “The draymen are probably going to catch the short end of the stick on this one.”
More immediately, motor carriers are concerned about empty Hanjin containers stacking up because some terminals won’t take them back. IMC has nearly 1,000 containers in storage yards across the country, according to George, and each day they’re returned, the company loses money.
“It costs us up to $300 to take it to our yard and then we have to store it, which costs $35 or $45 per day. You also have to pay a daily $30 fee for the chassis,” he said. “A used container runs from $900 to $1,500 aftermarket. So if you’re looking to hold the empty equipment as leverage, you’re barking up a dangerous tree because in a few weeks your holding costs will be more than the container is worth.”
RoadOne and Evans Network estimate that they have several hundred empty containers in their storage yards.
“In some locations, we’re lifting the containers off the chassis, putting them in the yard and returning the chassis,” said Chris Glitz, senior vice president of operations at Evans Network. “It’s not a great solution because we’re now stuck with these boxes sitting on the ground, taking up space.”
Evans Network ranks No. 59 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers and No. 4 on the Intermodal/Drayage sector list. IMC is No. 80 on the for-hire TT100 and No. 7 in the Intermodal/Drayage sector. RoadOne is No. 8 in the Intermodal/Drayage sector.
Moving forward, some executives hope that draymen change some of their practices to minimize their exposure.
“Carriers need to make sure that these ocean carriers pay within 30 days, Rodrigues said. “Hanjin was one of those that paid 90 days later, and this is exactly what can happen. Margins are so small in the drayage industry that if you extend the credit too far, you could be in trouble.”
