Omega Navigation Enterprises, Inc.(fka ONAVQ)

[RonnieD]

Omega Navigation scores Chapter 11 victory over HSH Nordbank
Tuesday 20 December 2011, 10:35
by Rajesh Joshi
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Outrage after judge accuses German lender of ‘reckless disregard for truth’
OMEGA Navigation Enterprises has scored a landmark victory in its Chapter 11 battle against senior lender HSH Nordbank in Houston, setting an extraordinary precedent for other
foreign shipping companies seeking refuge from unpaid banks through the US bankruptcy courts.
Judge Karen Brown has ordered HSH to show why it and its law firm White & Case should not face sanctions for “reckless disregard for truth and an intentional strategy to impede
and delay” the case.
The court has given Greece-based Omega until May 31, 2012 to present a reorganisation plan. Judge Brown rejected the bank’s attempt to convert the case to a Chapter 7
liquidation or to lift the automatic Chapter 11 stay.
Sources told Lloyd’s List the judge disposed of matters within 15 minutes of arriving at the Monday afternoon hearing.
“Rarely have we seen such judicial ire,” said one senior lawyer.
“I would not want to be at the receiving end of that,” said another.
Other off-the-record reactions used more colourful language.
The judge’s decision came after HSH sent a letter to Omega directors threatening to sue them for breach of fiduciary duty. She ruled against the bank in this regard, scheduling a
hearing in January to impose sanctions against HSH.
These sanctions will be distinct from the Omega case, possibly with a separate hearing.
HSH supporters are particularly concerned about Judge Brown’s threat to punish the bank with “equitable subordination”, which could jeopardise its voting rights in a reorganisation
and its position as a senior lender.
“This is at the extreme end of the range of unintended consequences,” said Blank Rome partner and bankruptcy specialist Jeremy Harwood.
The development attracted interest from players not usually concerned with corporate workouts.
Port Arthur, Texas-based Sinclair Oubre, president of seafarer-welfare body the Apostleship of the Sea, said: “It is ironic that a Greek shipowner has established status in a US
federal court, while foreign seafarers are routinely considered ineligible for such protection.”
The judge raised the possibility that if HSH’s existing counsel was sanctioned, the bank might need “other counsel to avoid conflict of interest”.
Judge Brown rejected all HSH’s allegations, saying they were not supported by evidence.
The bank had argued that the case was brought in bad faith, based on Omega’s alleged administrative insolvency. It also alleged impropriety involving a Glencore joint venture and
Omega’s relationship with hedge fund Delos.
However, some legal experts argued that Judge Brown “ignored the facts presented to her” and “was wrong”.
Blank Rome’s Mr Harwood said: “Most importantly this present issue distracts from showing whether the case should be dismissed and that collateral is deteriorating, which the
judge correctly said were ‘very important’ questions before her.”
The judge’s observations that HSH efforts to conduct marine surveys on Omega’s ships were not ordinary practice elicited some debate.
Lloyd’s List has unearthed a chapter on International Maritime Workouts, written by Holland & Knight partners Lennard Rambusch and Jovi Tenev, in the 2008 legal treatise
Business Workouts Manual. The chapter states that vessel inspections by surveyors are both normal and recommended lender practice in maritime workouts.
Omega counsel Evan Flaschen of Bracewell & Giuliani said his client was still open to a compromise. He hoped that HSH Nordbank would submit to Judge Brown’s suggestion of mediation.
Article from Lloyd's List
http://www.lloydslist.com/ll/sector/tankers/article387130.ece
Published: Tuesday 20 December 2011
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