NEWS / December 18, 2008

First cancellation of newbuilding in Japan
The cancellation of newbuilding order which have become effective seems to have occurred for the first time in Japan. According to market sources, the canceled order was placed by a leading Japanese shipowner at a compatriot shipyard and the down payment on the contract seems to have already been made.
Canceled ships are said to be a couple of mid-sized bulkers and delivery date and ship prices were not disclosed. The shipowner reportedly had not secured a charter contract before placing the order and as it got harder to find a charterer due to the market slump, the owner seems to have decided to nullify the order. It is said that the owner forfeited the deposit and paid a large sum of money additionally as an indemnity. The entire Japanese shipbuilding industry is expressing surprise over the cancellation. Some say even angrily that the decision is ‘absurd and intolerable’. Meanwhile, some say that the reason the shipyard accepted the cancellation request is that the shipowner is a ‘compatriot’. Besides, according to market sources, it is said an overseas shipowner has also requested cancellation at two Japanese shipyards. Ship type at stake is reportedly medium bulkers. It is said that the foreign owner had sold the newbuildings under construction to other owner but the buyer canceled it. Or it is said the charter contract the owner had settled in advance was canceled. Japanese shipbuilders, in any economic slumps, have so far completed all newbuilding deals once they came into effect and accordingly many say that it is unreasonable to demand order cancellation and firm attitude should be taken such as litigation. Some worry that one cancellation might lead to a flood of retraction requests. Newbuilding order cancellation is not just a matter of deposit loss but also causes a shipyard to get into a mess in terms of its shipbuilding schedule.



ABG Shipyard faces Rs 1,000-cr order cancellation
India’s largest private sector shipbuilder ABG Shipyard is running the risk of cancellation of orders worth Rs 1,000 crore ($211m) as the prospective Norwegian buyer for three seismic surveyor vessels is facing financial crunch. The Norway-based seismic data acquisition company, Scan Geophysical, on Monday said it failed to sign a sale and leaseback deal for the three vessels. Under a sale and leaseback agreement, a company sells the asset it owns, and leases it back from the buyer, typically on a long lease. The advantage is that the sale frees up capital to reduce debt while allowing it to use the same property. About a month ago, ABG Shipyard’s Singapore-based group company Pacific First Shipping (PFS) signed a letter of intent with Scan Geophysical for a sale and leaseback agreement. The agreement implied that Scan will sell its three new high-capacity 3D vessels, including complete seismic equipment, to PFS assuming responsibility for the majority of the remaining commitments related to the vessels and seismic equipment during the construction period. “Pacific First basically got into the agreement to save ABG Shipyard’s ship-building contract,” said an analyst tracking the company and familiar with the development. The stock of Scan Geophysical is down by over 98 per cent this year and about 99 per cent since its IPO at 27 crowns in May last year. “The Norwegian company has failed to get into the sale and leaseback deal but it may get into such a deal with Pacific First Shipping in coming times,” said Dhananjay Datar, chief financial officer, ABG Shipyard. “Our shipping contract is intact and it has not got any impact of it,” he insisted. Now, the Norwegian company is trying to raise debt to help the company sail through the trouble. “SCAN has already invested substantial amounts in seismic equipment for the new builds and will seek to raise debt financing secured by this equipment,” said the company to the local stock exchange in a statement on Monday. Delivery for the vessels are due in May 2009, December 2009 and June 2010. Published : December 18, 2008
ABG Shipyard faces Rs 1,000-cr order cancellation
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-->India’s largest private sector shipbuilder ABG Shipyard is running the risk of cancellation of orders worth Rs 1,000 crore ($211m) as the prospective Norwegian buyer for three seismic surveyor vessels is facing financial crunch. The Norway-based seismic data acquisition company, Scan Geophysical, on Monday said it failed to sign a sale and leaseback deal for the three vessels. Under a sale and leaseback agreement, a company sells the asset it owns, and leases it back from the buyer, typically on a long lease. The advantage is that the sale frees up capital to reduce debt while allowing it to use the same property. About a month ago, ABG Shipyard’s Singapore-based group company Pacific First Shipping (PFS) signed a letter of intent with Scan Geophysical for a sale and leaseback agreement. The agreement implied that Scan will sell its three new high-capacity 3D vessels, including complete seismic equipment, to PFS assuming responsibility for the majority of the remaining commitments related to the vessels and seismic equipment during the construction period. “Pacific First basically got into the agreement to save ABG Shipyard’s ship-building contract,” said an analyst tracking the company and familiar with the development. The stock of Scan Geophysical is down by over 98 per cent this year and about 99 per cent since its IPO at 27 crowns in May last year. “The Norwegian company has failed to get into the sale and leaseback deal but it may get into such a deal with Pacific First Shipping in coming times,” said Dhananjay Datar, chief financial officer, ABG Shipyard. “Our shipping contract is intact and it has not got any impact of it,” he insisted. Now, the Norwegian company is trying to raise debt to help the company sail through the trouble. “SCAN has already invested substantial amounts in seismic equipment for the new builds and will seek to raise debt financing secured by this equipment,” said the company to the local stock exchange in a statement on Monday. Delivery for the vessels are due in May 2009, December 2009 and June 2010.