THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, October 12, 1995 TAG: 9510120321
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 70 lines
Lykes Bros. Steamship Co. Inc., one of the port of Hampton Roads' largest shipping customers, said it declared bankruptcy Wednesday.
The nation's third largest cargo ship operator, Lykes filed for Chapter 11 bankruptcy protection from its creditors in the federal court in Tampa, Fla., where it is headquartered.
Lykes is the biggest U.S. shipping company to fall victim to the ebbing of subsidies provided by the federal government to insure a U.S.-flag fleet in the event of national emergencies.
In business since 1900, Lykes operates a fleet of 14 cargo vessels, including containerships and multi-purpose ships.
The shipping company transports more than 500,000 tons of cargo a year through Norfolk International Terminals, said Joseph A. Dorto, general manager and chief executive of Virginia International Terminals Inc., which operates NIT for the Virginia Port Authority.
The port handled nearly 8 million tons of cargo in 1994.
Lykes spends about $1 million a month at the Norfolk terminal and currently owes the port about $1.5 million, Dorto said.
While the bankruptcy throws repayment of that debt into question, it will not harm the port too much. ``Certainly if you take a $1.5 million hit it's a big hit,'' Dorto said. ``We'll have to tighten our belts, but it won't affect day-to-day operation of the port.''
One Lykes ship arrived in Norfolk Wednesday and another is scheduled to arrive today. The port will probably work those ships as it does normally.
Lykes provides service to Europe, the Mediterranean Sea and Mexico from Norfolk.
A Greek shipping company, Forum Maritime SA, has agreed to provide Lykes with a $10 million line of credit to help it reorganize.
Lykes and Forum Maritime are in talks to form a joint venture. That venture ``would form the basis of Lykes' plan of reorganization and would provide the infusion of substantial cash to pay creditors' claims, as well as providing additional working capital to the reorganized company,'' Lykes said in its announcement.
In addition to the unwillingness of Congress to re-enact longtime subsidies, Lykes cited the change in exchange rates between the dollar and the Japanese yen as a reason for its bankruptcy.
Lykes purchased four containerships from a Japanese shipyard and paid for them with yen-denominated debt. Since then the dollar has slid about 50 percent in value against the yen, increasing Lykes debt to the point it was unbearable.
Lykes also finds itself in an increasingly uncompetitive position against other shipping lines worldwide as an operator of U.S.-flag ships.
Three federal programs supported the U.S. maritime industry for years - government cargo was required to be shipped on U.S.-flag ships, a subsidy was provided to construct vessels in more expensive U.S. yards and another subsidy was provided to pay for higher operating costs associated with using U.S. crews and meeting U.S. regulations.
The programs were designed to maintain a fleet that could be used to transport military cargos in the event of a national emergency. But the construction subsidy program has been defunct since 1981 and the others are on their deathbeds in Congress.
Lykes and other domestic steamship companies have started flagging out their vessels to lower their operating costs and stay competitive. Four of Lykes ships operate under a foreign flag. The largest U.S. ship operator, Sea-Land Service Inc., a subsidiary of Richmond-based CSX Corp., put five vessels under the flag of the Marshall Islands earlier this year. by CNB