Shagang Shipping arrests HNA vessel MV Bulk Peace in Australia

By Finance

The Hong Kong based company Shagang Shipping has received the right to legally arrest the MV Bulk Peace (vessel operated by the HNA Group) from the Western Australia District Registry. This act is a result of a long-running legal process seeking US$66.4m from HNA Group. The company has not succeeded with its guarantee and has failed to comply with the terms of the signed contract about the 2008 hire of the ship MV Dong-A Astrea.

Shagang Shipping has arrested 3 vessels so far (MV Bulk Peace was arrested for the first time in India 3 years ago). The cruise ship MV Henna was also arrested (the same year in September). The Hong Kong company has received a winding up order against the HNA company Grand China Shipping.  Shagang Shipping has the right to receive financial transactions made by the HNA Group from 7 US and Chinese banks. 

The Hong Kong company informed:

"We are shinning a light on HNA and locating all of HNA's assets to enforce our claims. Whether these assets are heavily financed and backed by complicated leveraged transactions or not, we are examining them all closely. It is well reported that HNA relies on complicated lines of credit in order to aggressively expand and invest in aviation, shipping and hotels. But if HNA Group truly has unlimited access to such lines of credit we do not understand why they are going to such great lengths to avoid and delay honouring their contractual obligations to their business partners."

Shagang Shipping claims that the HNA Group is making everything possible to slow down the process and is trying to ignore the courts orders and even not to participate in negotiations about its debts. There is an information that different subsidiaries of the company such as Grand China Logistics Holdings (Group), Grand China Shipping (Yantai), Grand China Shipping (Hong Kong) Company Limited (in a process of liquidation), Ocean Container Trading (Hong Kong) and others have the same financial difficulties worldwide. Shagang Shipping believes that the only legal and effective action is arresting ships. There is a scheduled (9 February 2015) hearing at a London High Court.

The saga started in 2008 when the capesized bulk carrier MV Dong-A Astrea (property of Dong-A Tankers) was chartered by Shagang Shiping to a HNA Group company, Grand China Shipping Company Limited, the contract was for a period of 7 years. The problem was that Grand China Shipping only paid hire in accordance with the terms of the contract for the first 5 months and then stopped paying to Shagang Shiping (HNA Group was using the vessel without paying as promised). 

Calculations show that Shagang Shiping was not being paid $52,500 US dollars per day after the first 5 months of the contract. Over the time, the Hong Kong based company won 5 arbitration awards for unpaid hire (calculations show more than US$18 million). In November 2012, Shagang Shipping was awarded damages of about $58 m. Neither Grand China Shipping nor HNA Group Company Limited agreed to pay, but decided to appeal the decision which in fact was rejected by the English High Court.