The liquidation of Premier Cruise Lines has begun, as has the process of reimbursing thousands of passengers and repatriating of crew - but not without a few snags along the way for the fleet's mortgage holder, DLJ Capital Funding. On Sept. 18, Premier Operations Ltd., the Bermudan holding company, was placed in provisional liquidation, with PriceWaterhouseCoopers appointed as liquidator, while Freehill, Hogan & Mahar of New York was appointed to process claims of customers pursuant to Premier's $15 million surety bond, a role the firm previously performed during the Regency Cruises bankruptcy.

It is believed that DLJ sought to move the Premier fleet to the Bahamas, a jurisdiction wherein the claims of the mortgage holder (DLJ) supersede the claims of the ships' vendors, and where Premier could then auction the fleet in a Marshal's Sale, bid the price of the mortgage and ''buy" the fleet itself, effectively wiping the vessels clean of maritime liens in the process. Under that scenario, DLJ would then be in a position to sell the vessels free-and-clear and recoup some or all of the value of its Premier-related loans - which various unconfirmed sources have placed in the $50 million range - while suppliers who have claims against Premier's ships would get nothing.

But all has not gone according to the alleged plan: in some cases suppliers have successfully put themselves in line ahead of DLJ for payment. Of the five Premier ships serving as collateral on the DLJ loans, only three have made it to the Bahamas, the Rembrandt, Big Red Boat I (ex-Oceanic) and Big Red Boat III (ex-Islandbreeze). The Seawind Crown is still in Barcelona and the Seabreeze is stuck in Halifax until creditors are paid off. Meanwhile, the Big Red Boat II (ex-Edinburgh Castle), which is owned by the Progress Group, a joint venture between ISP and Cammel Laird, has been arrested by creditors in New York, and was still stuck at the Staten Island pier at press time.

Explaining the sequence of events which led to DLJ's problems with the Seabreeze were Russel Herder, general manager of Premier's shipping agent in Halifax, Kerr Norton Marine; and Francois Pinot, district administrator of the Federal Court of Canada. The week of the Premier closing, said Herder, the Seabreeze and Rembrandt, which had just left Halifax, turned around at sea and returned to join the Big Red Boat II, which was making its regularly scheduled stop on Thursday, Sept. 14. With all three in port, said Herder, passengers were disembarked from the Rembrandt and either placed on the Big Red Boat II to sail back to New York, or onto the Seabreeze, which would serve as a floating hotel that night for passengers who had to be flown home.

Pinot said that by 6 p.m. on Thursday, about a dozen creditors had filed claims on the three ships. Yet he explained, "We have a 24-hour system here in Canada, so between six and midnight, the owners of the Rembrandt and Big Red Boat II came to a private agreement with those creditors, so we allowed the Rembrandt and Big Red Boat II to sail at midnight, while many other creditors were asleep. The owner wanted to get out of port quietly," he explained.

In the morning however, the Seabreeze was still in port and creditors quickly piled on claims. At press time, Pinot counted 38 creditors - and rising with claims in the millions. The Seabreeze arrest is believed to be significant for jurisdictional reasons. According to James Stroup of James W. Stroup P.A., counsel representing Sysco Foods, ''Unlike in the Bahamas, the liens filed by the 'necessaries' (purveyors of necessary goods and services) have precedence over the mortgage-holder under Canadian law."

In N.Y., there was an initial report of claims against the Big Red Boat II in the $4-$5 million range, although that figure may have risen by press time. N.Y.-based Nourse & Bowles is reportedly handling claimants, while the shipowner is believed to be in negotiations for the redeployment of the vessel on a new charter after a deal is struck with creditors.

In Barcelona, a published account on Sept. 18 stated that the Seawind Crown had ''been evading an arrest order (registered by) Pullman Tours, who supply passengers and claim to be owed large sums," with the ship reportedly skipping calls in Naples and Rome to avoid arrest during the week of Sept. 14, until fuel shortages forced their return to Barcelona on Sept. 18. According to Juan Madrid, assistant director marketing/commercial for the Port of Barcelona, the ship has remained in port since then, with a judge blocking its departure.

Pullman at one point had reportedly signed a letter of intent for the purchase of both the Seawind Crown and the Rembrandt, for around $30 million. Pullman could not be reached for comment on whether such plans continue to exist nor to respond to rumors that Pullman is talking with the owners of the Big Red Boat II regarding a charter deal to replace the Seawind Crown.

At press time, potential buyers such as Imperial Majesty Cruise Line were being approached about purchasing individual Premier vessels. Other parties rumored to be talking include Paris Katsoufis and Bruce Nierenberg, the latter rumored to be interested in purchasing the Oceanic. A DLJ spokesperson did not return calls, and Geoffrey Hunter, provisional liquidator at PriceWaterhouseCoopers, said he could not comment at this time.