Marco Polo Seatrade sues shipping companies for inequitable conduct

By Jim Witters

Wilmington, Del., Jan. 18 - Marco Polo Seatrade BV and Magellano Marine CV allege that the inequitable conduct of Banksy Shipping Co. Ltd. and Indiana R Shipping Co. Ltd. "precipitated the failure of the debtors' prepetition restructuring efforts" and led to a bankruptcy filing, according to documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

Marco Polo and Magellano are seeking the avoidance of an ex parte prejudgment attachment lien "that has deprived the debtors of access to nearly $5 million of unencumbered cash" and the equitable disallowance of any claims asserted by Banksy or Indiana R.

As an alternative to the disallowance of claims, the debtors are seeking equitable subordination of those claims.

Basis of the litigation

As the debtors entered their final phase of reorganization in the spring and summer of 2011, Banksy and Indiana R "embarked on a scheme to catapult their own interests ahead of all other unsecured creditors who were working with debtors in good faith to resolve their own claims," court documents state.

Dutch company Futmarine BV, which is 50% owned by Marco Polo, had agreed to sell three shipbuilding contracts to a third party for $9.74 million under the terms of the restructuring agreement.

Banksy and Indiana R sought the attachment of Marco Polo's shares in Futmarine, blocking the debtors from accessing cash to fund settlements reached with other vessel owners.

"Defendants transferred nothing of value for the lien they took on the shares. Moreover, the attachment proceedings were in direct contravention of the dispute resolution provisions of the agreement governing the parties' underlying charters," documents state.

Using the Futmarine attachment as collateral, Banksy and Indiana R then "sought to elevate their unsecured claims ... into secured claims," documents state.

Rather than using the arbitration proceedings outlined in charter agreements, the defendants "sought to arrest" a vessel - the M/T Laura - that the debtors were about to sell as part of their restructuring plan, documents state.

The $41.14 million sale of the Laura was scheduled to close July 5, 2011. The defendants initiated arrest proceedings on June 27 as the ship approached Savona, Italy.

An Italian court rejected the arrest warrant, but it caused the debtors to fail to deliver the Laura to the buyer. This deprived the debtors of "millions of dollars in sale proceeds that were earmarked to retire various liquidated obligations to loaner counterparties," according to court documents.

Marco Polo Seatrade, an Amsterdam-based vessel owner, filed for bankruptcy on July 29. The Chapter 11 case number is 11-13634.

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