by WONG WEI KONG (16 Oct)
It says no official notification of Cosco Dalian's client filing for bankruptcy
COSCO Corp Singapore finally broke its silence yesterday on several issues which had driven down its share price, after it was prompted by several queries from the Singapore Exchange (SGX) to issue a statement.
News of Cosco's Norwegian client MPF Corp filing for bankruptcy recently had spooked the market, and fanned worries that the credit crisis could squeeze demand for new shipbuilding and lead to order cancellations. Cosco shares lost around 37 per cent over two days to close at 79.5 cents yesterday.
In its statement after the close of trading, Cosco said that it was brought to its attention that MPF, the buyer of a floating, production, drilling, storage and off-loading (FPDSO) unit being built by subsidiary Cosco Dalian, had sought bankruptcy protection. However, it has not received any official notification of the bankruptcy protection sought by MPF.
The value of the MPF contract is about US$119 million. MPF has made payments for the first three instalments amounting to US$98 million. The fourth (and final) payment of some US$21 million is due to be paid upon delivery of the vessel, scheduled for Dec 15.
'To date, Cosco Dalian has not received any indication from MPF that it is not willing or not able to make payment of the last instalment, and Cosco Dalian continues to perform its obligations under the building contract,' Cosco said.
Under the building contract, Cosco Dalian also has the right to sell the vessel if the payment of any instalment is not made by MPF. Based on current market prices, proceeds from the sale of the vessel would be more than sufficient to cover the sum of the outstanding instalment, Cosco added.
Giving an update on its dry bulk carrier delivery schedule, Cosco said that its subsidiary, Cosco Shipyard (Zhoushan) Co Ltd, had contracted with certain subsidiaries of the wider Cosco group for the construction and delivery of the first 10 units of 57,000 dwt dry bulk carriers.
An understanding has been reached with the counterparties that the first of these vessels will be delivered by Dec 31. The remaining nine vessels will be delivered progressively.
'To date, all the other remaining vessel building contracts being undertaken by the company's subsidiaries at Dalian and Guangdong are proceeding according to original schedule,' it said.
Other than a previously announced cancellation in April 2008, there has been no other cancellations of orders, Cosco said. 'The company is not aware of any solvency issues relating to its suppliers and/or customers.'
No profit warning is required and 23 per cent of the company's shipbuilding contracts are with companies within the wider Cosco group, it added.
-Research Report by WONG WEI KONG (16 Oct)
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