Details of the "major crisis" which pushed Korea Line to the brink of bankruptcy have come to light following its Chapter 15 filing in the US.

Plunging revenue, failed charters and rising finance costs all hit the shipowner, which began selling vessels and shares as it fought "massive losses" following the credit crunch.

In documents first filed to a Seoul Court last month, but made available in the US in the last few days, KLC reveals how a company racking up a KRW 367.80bn profit in 2008 came to lose KRW 595.10bn in 2009 and a further KRW 261.05bn ($231,743m) in 2010.

KLC said: "Due to the sudden global financial crisis in the latter half of 2008 and the slump in the global shipping industry, [we] came into a major crisis in respect of assets and profit loss status."



It says "massive losses" in 2009 and the latter half of 2010 cut its disposable funds from KRW 237.12bn in 2008 to KRW 133.09bn two years later.

It raised KRW 129.93bn in 2010 from a sale-and-leaseback deal and a bond issue. But with business losses burning KRW 56bn in cash, coupled with loan and bond repayments and newbuilding costs, KLC recorded more "losses in cash reserves than gains".

KLC saw sales collapse from KRW 3.31 trillion in 2008 to KRW 2.28 trillion in 2009 as a result of the financial crisis and the resulting slump in the global economy, the document shows.

During that period charterers began to delay making payments, drawing a provision of KRW 91.70bn.

In 2009 Korea Line sold shares in rival Hanjin Shipping, POSCO and Daewoo Shipbuilding & Marine Engineering to help raise cash.

It also entered a sale-and-leaseback deal for five vessels with Mitsubishi of Japan, resulting in further cash being set aside.

That year revenue plunged by 32% despite the company’s fleet remaining the same size, due to a falling Baltic Dry Index. Revenue fell by a further 5% in 2010, KLC says.

At this time the bulker operator noticed a "serious imbalance" in its long-term charter agreements.

Despite having several lucrative contracts of affreightment in place income was unable to keep pace with the cost of vessels chartered in a strong market.

KLC was further hit by bankruptcies and charterer defaults. As TradeWinds reported earlier today Britannia Bulk, Armada and Transfield, all of which went bust in the wake of the financial crisis, are named as counterparties of the South Korean owner.

Returned vessels were placed on the spot market, but were not covering KLC’s own charter costs. As a result of the charter failures and the weak market KLC has accumulated KRW 92bn in bad debt.

Having also been hit by derivatives losses in 2007 and 2008 KLC stopped the practice in 2009.

In the same year it began selling assets at a profit. These sales were worth KRW 37.55bn in 2009 and KRW 21.36bn last year, but were not enough to turn the tide.

KLC says costs on 150 of the 155 vessels in its chartered fleet were "significantly exceeding" the charter income in January, the month it filed for court protection in Seoul.

According to the documents KLC’s largest shareholder is CEO and chairman Jin Bang Lee, who owns 22.1% of the company. Daewoo Shipbuilding & Marine Engineering holds 5.6% and Hyundai Heavy Industries 2.5%.

Its list of 137 creditors includes many of the biggest names in shipping. Bocimar, Clipper Bulk, OSG, Cosco Bulk Carriers, Genco, Lauritzen, Mitsui OSK Lines, Oldendorff Carriers, Navios, STX Pan Ocean and Western Bulk are some of the names which jump out.