Coronavirus Puts Japanese Cruise Co. Into Insolvency

By Vince Sullivan
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Law360 (March 2, 2020, 9:33 PM EST) -- A Japanese company that runs dinner cruises in and around the city of Kobe filed an insolvency petition Monday that blamed a recent glut of passenger cancellations on the spread of the coronavirus.

Luminous Cruise Co. Ltd. filed its petition under the Civil Rehabilitation Act in Kobe District Court on Monday, according to an English-language version of the company's website. An unofficial translation of an announcement of its insolvency proceedings lays the blame for its financial troubles on the effects of the coronavirus outbreak that began in Wuhan, China, and has spread around the world.

The company also said that a 2018 earthquake near Osaka and higher than predicted rainfall over the last year hampered its ability to run cruises through Osaka Bay and the Port of Kobe.

All trips on its 350-foot-long, 4,700-ton ship, the Luminous Kobe 2, have been canceled due to the rehabilitation filing, and the company has made arrangements for customers to transfer their reservations to another operator nearby, according to its website.

Japan's Civil Rehabilitation Law allows companies in financial distress to negotiate a consensual arrangement with creditors to restore their business operations. Civil Rehabilitation is similar to a Chapter 11 proceeding in the United States in that a company remains a debtor-in-possession throughout the process, but the duration of a case is much shorter in Japan. The court overseeing the rehabilitation bars creditors from collecting on prepetition debts, similar to an American bankruptcy.

Representatives for Luminous Cruise Co. could not immediately be reached Monday for comment.

According to the latest reporting from The Associated Press, Japan has seen 976 cases of COVID-19, the illness caused by the virus, a figure that includes more than 700 cases among passengers on the Diamond Princess cruise ship docked in Yokohama, Japan. The ship was quarantined by Japan's Ministry of Health for two weeks after a passenger was found to be infected. The last passengers were allowed to leave the ship at the end of February, and crew members are currently under an additional quarantine ordered by the ministry, according to Princess Cruises, the operator of the Diamond Princess.

As of Monday, more than 89,000 people were infected with the disease globally and nearly 3,000 have died, according to the AP reports. The U.S. Centers for Disease Control and Prevention reported Monday that there were 43 cases of the coronavirus in the United States in addition to the 45 infected passengers of the Diamond Princess that were repatriated to the U.S. on planes chartered by the Department of State. Infections were reported in 11 states, and six people had died from the virus in the U.S. as of Monday.

Case and counsel information for Luminous Cruise Co. Ltd. was not immediately available Monday.

--Editing by Jill Coffey.

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