Op-Ed: A decade of financial restructuring in maritime

By Scott C. Clarkson, United States Bankruptcy Judge, Central District of California, Santa Ana, Calif.

Over the past decade, several international shipyards, boat builders, and marine shipping companies have encountered financial difficulties due to various external challenges. Notable examples include Harland & Wolff, the historic Belfast shipyard, renowned for building the Titanic, which faced insolvency in 2019 and again in 2024.  In September 2016, South Korea’s Hanjin Shipping, then the world’s seventh-largest container shipping line, was forced to restructure through the bankruptcy process. This event significantly disrupted global supply chains, stranding numerous ships and cargo worldwide.

Kleven Verft, the Norwegian shipyard, known for constructing vessels like the superyacht Ulysses, brought its insolvency proceedings in July 2020 after local banks terminated a loan agreement. The U.S.-based marine transportation company Harvey Gulf International Marine filed for Chapter 11 bankruptcy in 2018 and successfully emerged from proceedings later that year after restructuring its finances. Others followed, including Genting Hong Kong in early 2022 after its shipyard in Germany declared bankruptcy, triggering debts of approximately $2.78 billion.

The marine industry has experienced significant financial volatility over the past decade, influenced by various economic, environmental, and operational challenges. This volatility has led to notable insolvency proceedings and restructuring across shipyards, boat builders, and shipping companies worldwide. What are some of the key factors driving this instability?

Fluctuations in Global Trade might be the most significant difficulty. The marine shipping industry is closely tied to global trade volumes. Economic downturns, trade disputes, and geopolitical tensions have directly impacted shipping demand and profitability. For example, the U.S.-China trade situation and Brexit introduced uncertainty, affecting cargo volumes and creating financial strain on shipping companies dependent on consistent trade flows.

Another obvious continuing factor is the long-lasting impact of the COVID-19 Pandemic. The COVID-19 pandemic disrupted supply chains and halted operations across shipyards, ports, and shipping lines. With fewer ships moving goods and passengers, many companies faced substantial revenue declines.  Delayed construction projects, shutdowns, and labor shortages further impacted shipyards like Norway’s Kleven Verft and cruise-focused companies such as Genting Hong Kong.

Environmental Regulations certainly have a direct impact on the maritime industry. Regulatory changes, such as the IMO 2020 sulfur cap, imposed costly requirements on shipping companies to reduce emissions. Companies faced increased operational costs to retrofit ships, adopt new fuels, or invest in cleaner technologies. These regulations, while essential for environmental reasons, created financial burdens for companies struggling with cash flow, contributing to a wave of bankruptcies among firms unable to comply without heavy investment.

Rising Fuel Costs and Price Volatility have always been an issue. Fuel is a substantial expense for shipping companies. Price volatility in oil markets can quickly erode profit margins. Companies with limited financial reserves are particularly vulnerable to these price swings, which can render voyages unprofitable or lead to substantial losses. The instability in energy prices affects not only operational costs but also long-term planning, as companies may hesitate to invest in new technologies or fleet expansions.

Complex Financing and High Debt Loads are faced by many companies in the industry. Reliance on substantial debt financing, particularly to fund capital-intensive ship construction or upgrades, has always been a major concern. As profitability fluctuates, these debt obligations become harder to manage. Companies like Harvey Gulf International Marine successfully entered Chapter 11 proceedings to reorganize debt, reflecting the difficulty of servicing large loans during market downturns. To survive, many companies have pursued restructuring, mergers, or asset sales. The successes are obvious, and several companies have emerged from bankruptcy as leaner operations after reducing debt loads and reorganizing. Others have faced multiple insolvency periods and have relied on government intervention or new ownership to remain afloat. These restructuring efforts have led to a more cautious, cost-conscious industry with a focus on operational efficiency and sustainable practices.

Future Outlook, Signs of Difficulties and Challenges

The industry is likely to remain volatile as it navigates stricter environmental standards, demand uncertainty, and the need for greener technologies. Investment in sustainable fuels, digitization, and automation will certainly help mitigate some financial pressures, but the high costs of such transformations could also pose challenges, particularly for smaller or highly leveraged companies. In this complex landscape, only those with resilient business models and adaptive strategies are expected to thrive.

Marine industry companies facing tough financial situations can avoid insolvent and reorganization proceedings through proactive measures that stabilize cash flow, control costs, diversify revenue, and invest in necessary technology and compliance. By building resilience through these strategies, marine businesses can strengthen their financial position and remain competitive in a dynamic and often unpredictable industry.

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