Deiulemar Shipping, a major Italian dry freight group, has been declared bankrupt owing more than 500 million euros, an Italian court and the company said on Wednesday, the latest casualty of a worsening freight market crisis.

The slump, one of the worst ever faced by the sector, has sunk a number of dry bulk firms including Britain's oldest, Stephenson Clarke Shipping Ltd.

"Deiulemar Shipping was declared bankrupt by the court of Torre Annunziata this week," said Astolfo Di Amato, the lawyer representing Deiulemar Shipping.

The court, which is near the port city of Naples, said the company was declared bankrupt late on Tuesday with administrators appointed.

Deiulemar Shipping, also based near Naples, was founded by the sons of the owners of another shipping company, Deiulemar Compagnia di Navigazione, which has also been declared bankrupt earlier this year owing about 860 million euros ($1.11 billion), mostly to angry bondholders.

In July, Italian police seized assets amounting to 323 million euros, which included 10 vessels belonging to Deiulemar Shipping, and arrested nine members of the founding families in connection with the bankruptcy of Deiulemar Compagnia di Navigazione.

Soon after, lawyer Di Amato filed a debt restructuring proposal that would have included the liquidation of Deiulemar Shipping and the sale of all its assets to partially satisfy its creditors.

Before the proposal could be evaluated though, the court seized two more vessels on Sep. 18, leaving Deiulemar Shipping in control of only four ships.

"At that point we started making new calculations to evaluate whether it was possible to come out with a new plan but we thought this was not possible and asked for the company to be declared bankrupt," Di Amato told Reuters.

The court-nominated administrators will be managing the company's assets until a potential auction.

Di Amato said it would be difficult to find buyers for the vessels unless the court is prepared to accept very low prices.

The value of a five-year old panamax dry bulk vessel, which usually transports cargoes such as grains, has slumped to $20 million from nearly $90 million before the financial turmoil in 2008, Baltic Exchange data showed.

"The freight market remains at very low levels and there is not much that shipping companies can do about it. The latest news about Dieulemar is just confirming what was widely known," a ship industry source.

"Low asset prices are one of the problems facing the sector at the moment. If the court decides to auction the vessels, they have to be prepared that they will only recoup a fraction of the value of the ships."

Dry bulk shipping companies ordered large numbers of new vessels between 2007 and 2009, when freight rates hit record highs. But the extra shipping capacity arrived just as economies were slowing down, sending rates tumbling.

"This is more a tale of how someone over stretched themselves and people will be looking at the fallout. It's now more a case of what happens with the restructuring process," another ship industry source said.

Source: Reuters