How to engineer a ‘swift and silent’ rescue of a container line

Model rescue

And yet PIL could easily have foundered but for the remarkable rescue that financial circles now see as a model for other container lines that run into trouble in an increasingly turmoiled industry.

The latest numbers tell the story of the turnaround. PIL’s financial results for the 2024/2025 year, released in May, show the line more than quadrupled net profit after tax, up from 2023’s US$307M to 2024’s US$1.34Bn on revenues of US$4.3Bn, up nearly 50%. According to Mr Kastrup, “this performance arose from the strong results delivered by the container shipping business.” The engine of the group’s recovery, the container sector, delivered revenues of US$3.76Bn compared to 2023’s US$1.25Bn, a spectacular gain which was, he pointed out, “driven mainly by stronger freight rates, high asset utilisations and a volume growth of 9.6% year-on-year in a highly disrupted market environment.”

The new-look line seems to thrive on disruption. PIL has a container-manufacturing business whose revenues in 2023 were lacklustre at US$163M, before three geopolitical events intervened in its favour. The Red Sea crisis triggered a surge in demand for dry freight containers. The American presidential elections was preceded by a rush to restock in US markets – and widely so given the advent of the tariff wars. And the record number of newbuild deliveries to other lines stimulated demand for containers. As a result, 2024 revenues from the container-manufacturing division shot up by more than three times, to US$540M, while much-needed EBITDA improved to US$47M.

“The new-look line seems to thrive on disruption”

If further proof of the success of the turnaround is needed, PIL’s balance sheet also looks to be in rude health, with cash of US$3.22Bn.

Mr Kastrup attributes much of the turnaround to adroit management of its vessels. “With agile asset optimisation we were able to capture the strong volumes in the region which we serve”, he explained. “We move ships around incredibly opportunistically.”

Key actor in the rescue

According to Singapore law firm WongPartnership, one of the key actors in the rescue, it was a vindication of the country’s relatively new restructuring laws. As lawyer, Stephanie Yeo, wrote in a paper entitled The swift and silent restructuring of Singapore’s Pacific International Lines, Singapore’s Chapter 11-style corporate laws and the way the company was saved “serves as Singapore’s blueprint today for restructurings of container shipping lines globally and large-scale restructuring generally.”

All in all, she argues, the rescue was “swift and elegant” and was the outcome of a rewritten tool kit that was fully exploited in the case of PIL. Before the laws were applied for PIL, there had been considerable doubt about their effectiveness because of long-running squabbles in the restructuring of two other Singaporean companies, water treatment group Hyflux and once-mighty oil trader Hin Leong.

Essentially, she explains, PIL’s rescue was pre-negotiated to avoid disputes between creditors and damaging publicity, while also keeping the line in operation.

The Singapore line had been in a precarious position. “It was no secret that PIL had been facing increasing pressure from the steep downturn in shipping demand over the past few years, with various industry insiders pegging PIL as a potential takeover target by Cosco”, she wrote.

The onset of the pandemic then hit the group’s revenues, raising the spectre of South Korea’s Hanjin Shipping, that went bankrupt in 2017. The world’s seventh-largest containership company at the time and considerably bigger than PIL, Hanjin had been involved in restructuring discussions for months before it collapsed after the main lender walked away. That prompted the beleaguered line to apply in the courts for what is known as equivalent moratorium relief, but it was the very court filing that started an implosion along the entire supply chain and many vessels were stranded or seized.

As the parties to the PIL rescue understood, nothing could then be done.

At all costs the supply chain had to remain intact, concluded WongPartnership and other parties. It immediately became an all-Singapore rescue, with WongPartnership acting as legal advisor, Evercore Asia (Singapore) as investment banker advising on capital raising, and AlixPartners as operational consultant.

“This was an unusual move with a cocktail of sophisticated advisors, as pre-negotiated restructurings, although fairly common in Chapter 11 proceedings, are not typically undertaken in Singapore”, she explained. “However, it was necessary for the survival of the business that the deal proceed as expeditiously as in Chapter 11 restructurings.”

“Capitalise on the burgeoning trade flows”

Speed was of the essence. The advantage of a pre-negotiated restructure, as distinct from a “pre-pack”, is that the key terms are agreed by principal creditors before the filing of any court proceedings. It was only when a substantial body of creditors came onboard that draft restructuring documents were drawn up “in substantially final form”, along with a request that the whole process, including court hearings, be hurried along as rapidly as possible.

This expedited timetable worked because PIL had relatively few creditors and was not seeking to undertake a comprehensive restructuring of its business. In hard numbers, the container group had somewhat more than 50 creditors including banks, financial lessors and bondholders.

In a lesson for similar restructurings it came down to a three-step process: no enforcement action from bank lenders; continuing operations to preserve the business; and enough carefully managed cash to preserve liquidity. The banks joined the party by agreeing a freeze on principal and interest payments, while continuing repayments to trade suppliers and financial lessors who were located in other jurisdictions.

At all costs, the money had to keep flowing.

Here, explained Ms Yeo, the Hanjin collapse helped keep the parties in line: “Having seen the commercial fallout from Hanjin Shipping’s public court filing, the irretrievable consequences that would follow should PIL be forced to file for court protection were clear. Second, any enforcement action taken by financial lessors situated in other jurisdictions, such as vessel arrests, would have a domino effect on the company’s business operations and that it would be nearly impossible for the company to recover from such actions.”

An informal steering committee was established to keep all the parties in the loop and enable PIL to throw all its efforts into its restructuring. Without the distraction of endless negotiations with creditors, the line was able put the plan together in a few months.

But where did the money come from? Heliconia, a division of Temasek, Singapore’s sovereign investment giant, came up with US$112M in an emergency line of credit that was crucial in keeping the ships moving while the restructuring plan was negotiated. That, noted Ms Yeo, “was the lynch pin”. There were no unencumbered assets to use as security and Heliconia was clearly sufficiently convinced that PIL could trade its way back into solvency.

In effect, Heliconia stood in for the major lenders. If the restructuring failed, it would be expected to compensate Heliconia in due course.

And it was all done in slightly under four months — “a duration almost unheard of in the context of large-scale Singapore restructurings,” noted Ms Yeo. The speed of execution also helped keep PIL’s troubles out of the news. “With the increasing adoption of selected Chapter 11-style provisions globally, PIL’s pre-negotiated restructuring paves the way for similar containership liner restructuring deals internationally,” concluded Ms Yeo.

And given the mounting tensions on the world’s waterways, such deals may become necessary.

Restructuring success

PIL’s successful restructuring can be measured by the speed of its recovery. In late 2021 it repaid US$1Bn to creditors way ahead of schedule, on the back of fast-rising box rates. As executive chairman Mr Teo said: “With our healthy cashflow situation, we decided that it was only right that we reciprocate the support shown to us by our creditors and partners, and repay the debts owed to all our scheme creditors, ahead of schedule. We believe that they would benefit from the certainty of having cash returned to them earlier than anticipated.”

Flush with cash, PIL has announced a flurry of initiatives since early 2025, including expanded routes and the opening of dedicated offices in Africa and Auckland. It is also working with global port operator PSA and class society DNV on the creation of end-to-end green supply chains.

PIL is now a “well-capitalised company with a solid financial structure going forward,” summarised Mr Teo.