Fairstar Heavy Transport NV has failed to make payments concerning the acquisition and building of a fifth vessel (MV Fathom), identical to the two earlier new builds MV Forte and MV Finesse. The company entered the contract with a face value of USD 110 million with China Shipbuilding Trading Company Limited (CSTC) and Guangzhou Shipyard International Company Limited (GSI) on 3 May 2011.
The company that acquired Fairstar earlier this month, Dockwise, announced this last week.
Failure to Pay First Two Instalments
This Shipbuilding Contract was amended by a Memorandum of Agreement to the Shipbuilding Contract on 23 May 2012 to the extent that Fairstar was obliged to make payment of the first and second instalments under the shipbuilding contract by 20 June 2012. Any failure to do so would constitute an event of default under the contract and entitle CSTC and GSI to terminate it. In the event of such termination, Fairstar will be obliged to pay a termination fee in the amount of USD 37.5 million. Further, Fairstar in that case shall forfeit the USD 2 million down payment already paid. Fairstair failed to pay the sums due by 20 June 2012.
Contract not yet Terminated
Until now, there is no indication that the contract has been terminated. Fairstar and CSTC and GSI have agreed to meet with Fairstar management shortly and discuss the present situation. Meanwhile, Fairstar and Dockwise are looking at scenarios, involving amongst others the earlier announced intended conversion of the Black Marlin which, when viewed from a combined fleet perspective, will allow for optimisation in CAPEX commitments and CAPEX planning without a need for additional equity for the foreseeable future.
