CAI International has $40 million of equipment exposure on Hanjin Shipping
On August 31, 2016 Hanjin, the world's 7th largest container shipping line, announced that it had filed for court protection in South Korea from its creditors. A receiver was appointed on September 1, 2016.
CAI has approximately 15,000 containers on lease to Hanjin representing $40 million of equipment exposure based on net book value, or approximately 2% of the company's rental revenue assets.
CAI's share of the overall container leasing market is approximately 6%, however, the company believe its equipment only accounts for approximately 2% of Hanjin's leased container fleet.
Based on the company's prior experience, the company believes that most of the company's containers will be recovered. The company's units on lease to Hanjin were manufactured for CAI in the company's color, with its logo and markings, which should assist with recovery and re-leasing efforts.
CAI maintains insolvency insurance that covers the value of unreturned containers, damage to recovered units, recovery costs, legal expenses and the loss of post-bankruptcy income for a period from the default date to the earlier of the return of the equipment or six months.
The company's insolvency insurance has a $2 million deductible. Based on the level of the company's exposure to Hanjin and recovery expectations,it expects its insurance policy limits will be more than adequate to cover any potential losses in excess of the $2 million deductible.
The losses related to the deductible will be for expenses that are incurred over the period of recovery and are not expected to be an immediate expense.
At this point, CAI International is unable to definitively estimate the total impact of Hanjin's bankruptcy filing on the company's financial results.
But the company believes the company's exposure will be limited to $2.6 million of accounts receivable related to income recognized prior to the third quarter of 2016, which is not insured and may not be recovered, and up to the $2 million deductible on the company's insolvency insurance policy. ■