Quantcast
StarBulletin.com

Abandon ships


By

POSTED: Wednesday, June 17, 2009

The Hawaii Superferry, anchored in bankruptcy in a Wilmington, Del., courtroom, is seeking to literally abandon ship about three months after legal and environmental obstacles forced it to cease operations in the islands.

Citing the expenses to maintain its two idled vessels, the Superferry has filed a motion to walk away from the ships and release its financial interest in the ferries.

“;It is unclear if there is any equity in the vessels given current market conditions, and the debtors do not have sufficient liquidity at this time to continue to maintain the vessels while waiting for market conditions to improve,”; the motion said.

The Superferry said it is incurring significant costs for things such as insurance, maintenance, security and storage.

“;For these reasons, the debtors in their business judgment have determined that abandonment of the vessels is appropriate since the vessels constitute a burden to the estate,”; the motion said. “;By abandoning the vessels, the debtors will eliminate this current and ongoing burden and expense.”;

A hearing on the motion, which was filed last week, is set for July 1.

The Superferry, which operated the $85 million high-speed, aluminum-hulled Alakai between Honolulu and Maui until it ceased operations in mid-March, also owns a second ship, the Huakai, which recently was constructed by Austal USA LLC at its Mobile, Ala., shipyard and delivered to the Superferry around April 21. That ship would have allowed the Superferry to expand its service to the Big Island and revisit initial plans to sail to Kauai.

But the Superferry was stopped in its wake on March 16 after the state Supreme Court ruled that Act 2, a law passed by the state Legislature in October 2007, was unconstitutional because it benefited a specific company. The law had enabled the Superferry to keep operating while trying to complete an environmental impact statement study.

The Superferry, in its motion for abandoning the ships, said that as of its May 30 bankruptcy filing it owed $135.8 million to the U.S. Department of Transportation's Maritime Administration through a guaranteed loan that provided financing to construct the vessels. Austal, the second lien holder, is owed $23 million through two term loans. And the only money owed the Hawaii Department of Transportation is secured by an $833,000 letter of credit, the motion said. The Superferry contended in its motion that no money is owed the state through a $40 million Harbors Operating Agreement due to the state Supreme Court ruling and an earlier ruling by the Second Circuit Court on Maui . The agreement allowed the Superferry to use specific pier areas at the Honolulu, Nawiliwili, Kahului and Kawaihae harbors and the use of certain equipment, such as ramps and barges, provided by the state DOT.

Tom Fargo, president and chief executive of the Superferry, declined to comment yesterday because of the bankruptcy proceedings.

A spokeswoman for law firm Pepper Hamilton LLP, which represents the Superferry, said the firm had “;no comment at this time.”;

Craig Wolfe, an attorney for the Superferry's unsecured creditors' committee, didn't respond to a phone call or e-mail.

Following the state Supreme Court's March 16 ruling, Fargo said at a news conference that an environmental impact statement study might take a year or more to complete even with the work that already had been done. He said the Superferry would look for commercial or military work in or outside Hawaii.

But the motion said the Superferry has been unable to obtain financing that would permit it to maintain existing operations until determing whether one or more of the vessels can be chartered.

“;While discussions with potential sources of financing are ongoing, it is the debtors' present intention to liquidate its remaining assets and distribute them to creditors pursuant to a liquidating plan,”; the motion said.

The 349-foot twin-hulled catamaran Alakai, which was capable of carrying up to 866 passengers and 282 cars, began interisland service in August 2007.

However, court challenges and protesters in harbor waters off Kauai and Maui led the ferry to suspend operations until the Legislature came back in special session in October 2007 to pass Act 2.

MILESTONES

» Aug. 23, 2007: Hawaii Supreme Court rules that environmental laws require the state to review the impact of Superferry operations.

» Aug. 26, 2007: Inaugural voyage to Maui.

» Oct. 31, 2007: Hawaii Legislature passes Act 2 in a special session to allow the Superferry to operate while an environmental impact statement study is conducted.

» March 16, 2009: Hawaii Supreme Court rules that the state law allowing Superferry to operate while an environmental impact statement is conducted is unconstitutional.

» May 30, 2009: Hawaii Superferry files for Chapter 11 bankruptcy.

» June 11, 2009: Hawaii Superferry files a motion to abandon its ferries.

Source: Star-Bulletin