Kuznik judges the Judges

Former HSH Nordbank boss Harald Kuznik slammed the maritime knowledge of US bankruptcy courts in comments made today to a London financial conference.

In a question posed from the floor at the Marine Money conference, Kuznik described the understanding of US judges’ handling Chapter 11 restructurings as “ridiculous”.

As one example, he alluded to a case in which a judge had allowed a ship to sail without insurance.

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Kuznik was global head of shipping at HSH at the time the bank made loans to Greece’s Omega Navigation, which is now engaged in a high-profile Chapter 11 reorganisation in US bankruptcy court in Houston. HSH leads the syndicate of secured creditors.

The case has not gone well for HSH thus far, as the court has granted Omega an exclusivity period into June and rebuffed the bank’s attempts to convert the filing to a Chapter 7 liquidation.

US Judge Karen Brown also has threatened HSH and its lawyers with sanctions over purported “reckless disregard for truth” in how it has handled its claims against Omega.

Kuznik, now a consultant, retired from HSH Nordbank in October 2010.

Kuznik did not refer to the Omega case in his remarks, but challenged a panel of restructuring specialists on whether US courts had managed to improve their shipping knowledge.

The panel was split in its response.

Attorney Gregory Petrick of Cadwalder Wickersham & Taft explained: “It’s a different system: insurance and such matters are left to the company.”

However, restructuring specialist Albert Stein of Alix Partners said knowledge varies depending on which of the many jurisdictions is hosting the case.

“Some of the courts are way behind the curve,” Stein said.

Panelists agreed there would be an increase in Chapter 11 filings in 2012, but that such cases would continue to represent just a small fraction of shipping restructurings.

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