NEW YORK -- A federal bankruptcy judge in New York gave the
go-ahead on Nov. 2 for the sale of five ships from the defunct
Premier Cruise Lines fleet, according to court records. Proceeds
from the sales will return to the court, which will determine their
distribution to creditors, said lawyers familiar with the case.
Premier, which abruptly ceased operations in September, filed a
Chapter 7 bankruptcy petition in the U.S. Bankruptcy Court for New
York's southern district on Oct. 24. The Chapter 7 filing came one
month after liquidators appointed by Bermuda's government filed a
bankruptcy petition in that country's Supreme Court.
Premier was incorporated in Bermuda, but it remains unclear why
the government stepped in to place the company into bankruptcy.
Still, the U.S. filing provides Bermuda, and Donaldson Lufkin
and Jenrette (DLJ), Premier's principal creditor, with options
absent from the Bermuda filing, said lawyers familiar with the
proceedings.
"The liquidators and DLJ are trying to sell the ships, under
maritime law, at the locations where they were ... arrested," said
Ron Wiss, a lawyer with New Jersey-based Wolff & Samson, which
represents Greenwich Insurance Co. Greenwich holds the sureties for
Premier's Federal Maritime Commission bonds, which insure passenger
deposits.
"Bermuda's government appointed the liquidators, and we don't
how or why," he said.
Three of the ships, IslandBreeze, Oceanic and Rembrandt, are in
the Bahamas under DLJ's control. SeaBreeze remains under
third-party arrest in Halifax, Nova Scotia. A fifth ship, Seawind
Crown, also is under arrest, in Barcelona. A sixth ship, Big Red
Boat II, was chartered by Premier from Oceanic Marine Ltd. and
remains under arrest in New York.
The sale of the former Premier vessels will not necessarily
affect passengers with outstanding bookings. While officials at
Freehill Hogan & Mahar, a New York law firm processing FMC
claims, is advising passengers to first seek compensation from
their credit-card companies, passengers with unfulfilled bookings
are also entitled to payments from Premier's FMC bond.
The line "was in compliance with FMC's bonding requirements,"
when it shut down, said FMC attorney Chris Hughey. An FMC
spokeswoman said the bond is for $50 million.
But a lengthy court battle could delay the bond payments, which
can't be processed until the bankruptcy case is resolved.
Also, travel agent commissions for Premier bookings are not
covered under the FMC bond. Any commission payments must come
through the bankruptcy proceedings. "Travel agents are at this
point creditors of Premier," said Wiss. "They're definitely locked
into the bankruptcy proceedings."
In fact, Premier sellers with outstanding commissions will have
to hope for a speedy sale of the ships, which as Wiss pointed out,
"are the only assets left." But he added that "it will be difficult
to get a quick resolution to this case because there are so many
jurisdictions and proceedings."
Indeed, Greenwich filed petitions in early November to block any
sale of the ships to ensure "An orderly liquidation of Premier's
assets to maximize values for unsecured creditors," according to
court documents. Greenwich officials estimate their "exposure"
under the bonds to be "in the tens of millions of dollars."
Premier's total debts are in excess of $72 million, according to
court documents. About $50 million of that total is owed to DLJ and
secured by its mortgages on the Premier ships. The ships may have a
collective value "substantially in excess of DLJ's claims,"
according to the court.
Meanwhile, the FMC continues to receive inquiries from
passengers with outstanding Premier bookings. "People are still
putting in claims and we expect more," a spokeswoman said. The
total dollar value of the claims could exceed the 1995 bankruptcy
of Regency Cruises, she added.