Exploration Starship Ship Arrest

Exploration Cruise Lines creditors wasted no time in getting a court order to “arrest” the Exploration Starship in San Juan and the North Star in Baja, Mexico as protection of their debts in Exploration’s recent Chapter 11 bankruptcy case.

The Fearnley & Eger-owned ships, which were on time charters to Exploration that expired on the North Star in April 1989 and in June 1990 for the Starship, were seized and impounded by government officials shortly after Exploration filed for reeorganization on Nov. 16 in U.S. Bankruptcy Court in Seattle.

Michael Sandler, an attorney for Fearnley & Eger in Seattle, confirmed that the 250-passenger Starship was arrested by the U.S. Marshall’s office in San Juan on Nov. 22 and that Mexican government officials “restrained” the North Star when it arrived in La Paz on Nov. 19.

While Sandler stressed that both time charters specially stated that Exploration was obligated to obtain quick release of the vessels in such circumstances, he said that Exploration illegally allowed expenses on both of the ships to go unpaid at the time that the Seattle-based cruise line filed for reorganization.

Sandler also said that Fearnley & Eger’s attorneys were discussing the problem with Exploration officials and joined another F&E spokesman in predicting that the two ships would be returned within two weeks.

Illegal Arrest

Sandler also said that Southeast Stevedoring of Alaska apparently acted illegally when the port operators for all Alaska-bound cruise ships obtained a court order to “arrest” the Starship in San Juan on Nov. 22. He said that the U.S. Marshall’s office had arrested the vessel and port officials in San Juan noted that it had been moved to Puerto Rican Drydock and Marine Terminal in San Juan by the U.S. Marshall’s office.

“It appears that Southeast Stevedoring acted in violation of the ‘automatic stay’ provision of U.S. bankruptcy laws that states that a party cannot proceed against a defendant’s assets during bankruptcy proceedings ,” Sandler said. “The Explorer Starship has been arrested to my knowledge, but Mexican port authorities have only issued a restraining order against the North Star to my knowledge that prevents us from moving that ship.”

The Exploration suit also asked the court to nullify the cruise line’s repurchase of 80 percent of the company from Anheuser-Busch last May 17 for $10 million and to force Anheuser-Busch to assume all Exploration’s debts. Exploration said in the suit that it had been insolvent since at least May 17 and had lost some $40 million during the 31 months that Anheuser-Busch was the majority owner.

Exploration charged in the suit that Anheuser-Busch had full knowledge of the cruise line’s insolvency and full control of its finances when it forced Exploration to assume debt that it couldn’t reasonably pay.

The cruise line also charged that Anheuser­-Busch’s decision to take the Colonial Explorer as security against Exploration impeded the cruise line’s ability to generate additional capital.

Disgruntled Agents

Owner Rob Lamka of the Cruise Holidays franchise in Kirkland, Wash., said that Exploration would have “a hard time with its credibility with both consumers and agents” if the cruise line doesn’t meet its commitments quickly and thoroughly. Lamka predicted that Exploration would have to settle its accounts with both agents and consumers before March to maintain credibility with those parties.

“I really think that some outside force would have to come into the picture to run Exploration under a new name if Exploration isn’t able to make full refunds to clients and to honor all agent commissions by late February,” Lamka said. “I also think that they would have to publicize the fact that they acted swiftly and thoroughly so that their credibility isn’t completely undermined.”

Lamka said that he had four cabins booked on Exploration ships at the time of the filing and predicted that he could lose four of the eight clients “for good” if Exploration isn’t able to resolve its client commitments soon. He said that two of the clients were able to stop their check and were quickly rebooked by him with another line and that any additional rebookings would hinge on a quick resolution of the refunds.

“I would have made about $5,000 on the eight bookings and now expect to lose somewhere between $2,000 and $3,000 and that means a lot when your volume is just $600,000 and you have two full-timers and one part-timer worker in your agency,” Lamka said. “I also think that I wouldn’t be able to ever support Exploration again if they don’t fully honor my commissions.”

Lamka explained that Exploration has been “totally non-committal” on whether the cruise line expects to honor all agent commissions and groused that he hadn’t been able to reach the cruise line after receiving an initial phone call from Exploration. He added that his one-year-old cruise-only agency in suburban Seattle was especially hard hit by the reorganization because he was operating on such a small profit margin.

Exploration reported total assets of $7.2 million and outstanding debts of $31.4 million in papers filed in bankruptcy court and informed sources said that the cruise line’s other six vessels are actually owned by limited partnerships. Exploration also held a $100,000 surety bond under Asta’s Tour Payment and Protection Plan and a second $100,000 surety bond through the U.S. Tour Operators Association.

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