×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Thai ship-owner re-sells three ABG ships on delivery delay

Thai ship-owner re-sells three ABG ships on delivery delay
Comment E-mail Print Share
First Published: Tue, Mar 22 2011. 08 37 PM IST
Updated: Tue, Mar 22 2011. 08 37 PM IST
Bangalore: Thailand-based dry bulk cargo specialist Precious Shipping Public Co. Ltd has sold three small dry bulk ships ordered at ABG Shipyard Ltd in 2007 to a third-party buyer after the Indian shipbuilder slipped on delivery schedules.
The three ships were part of the 18 ordered by Bangkok-based Precious Shipping at ABG at a total cost of $518 million (Rs2,331 crore today) with deliveries starting from March 2010 and running through to December 2013.
The first two ships with a cargo carrying capacity of 34,000 tones each were slated for delivery on 15 March and 31 July 2010, while the third with a cargo carrying capacity to 54,000 tones was to be handed over on 31 December 2010. The three ships are now expected to be completed later this year.
Precious Shipping said in a statement to the Stock Exchange of Thailand on Monday that it has sold these three ships to Global Bulk Carriers Pte Ltd.
Precious Shipping said that the delivery dates of these three ships were “not suitable” and that it opted to dispose of the contracts because it enabled the ship owner to “fully recover all instalments paid to the shipbuilder plus interest at 7.5% per annum plus $100,000 per shipbuilding contract”.
The re-sale, though, will not materially affect the order book position of ABG, which is currently constructing 91 ships worth Rs13,180 crore.
ABG said such re-sales are common in the shipbuilding industry. “Many ships gets sold during construction. It will not affect our position in any manner whatsoever,” said Dhananjay Datar, chief financial officer at ABG.
Under the terms of typical shipbuilding contracts, the buyer is entitled to walk away from the deal and recover all instalments paid if the shipbuilder is more than seven months late. If the shipbuilder is unable to pay, the buyer can enforce refund guarantees issued by the shipbuilder’s bank.
“Recovery of instalments paid from ABG is an option available to Precious Shipping. However, it may strain the relationship between Precious and ABG as well as tax ABG’s financial resources. Therefore, a re-sale appears to be the best option for both the parties,” Raymond Yap, an analyst at CIMB Research Pte Ltd, wrote in a 22 March report.
The two 34,000 tonne capacity ships were contracted with ABG at $30 million each and instalments of $18 million each were paid. Precious has sold each of these ships to Global Bulk Carriers for $21.6 million.
The third ship was contracted with the yard at $38 million and instalments of $22.8 million have been paid. This ship has been sold to Global Bulk Carriers for $28 million. Thus, Precious Shipping is expected to receive $71.2 million from the sale of the three ships to Global Bulk Carriers against instalments paid to ABG of $58.8 million. The difference represents interest of 7.5% per annum from the dates of payment of the respective instalments.
Precious Shipping, ABG’s biggest customer, has also agreed to revise delivery dates for 14 of the remaining ships on order, Precious informed the Stock Exchange of Thailand.
p.manoj@livemint.com
Comment E-mail Print Share
First Published: Tue, Mar 22 2011. 08 37 PM IST