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ARM MERCHANT SHIPS?
Should merchant ships transiting high risk areas carry small arms for defense against pirates?

Selected crew should be trained and have guns available
Professional armed security teams should be hired
No guns on merchant ships, ever

August 6, 2009

Aker Philadelphia warns of counterparty risk

In its report for the quarter ended June 30, 2009, Aker Philadelphia Shipyard ASA (AKPS) recorded operating revenues of $55.0 million and EBITDA (earnings before interest, taxes and depreciation and amortization) of $4.5 million. Revenues were down 23% compared with the same e quarter last year, while EBITDA were up 7% compared to the second quarter 2008.

Aker Philadelphia warns that it is facing an increased counterparty risk. Its only customer, American Shipping Company (AMSC)--the former Aker American Shipping-- has not been able to arrange financing for its two shuttle tankers. In addition, the nonbinding settlement agreement between AMSC and its charterer, Overseas Shipholding Group (OSG), to settle all of their commercial disagreements, signed in March 2009, has not been implemented. If financing for the shuttle tankers is not obtained or the parties do not reach a definitive settlement agreement in the near term, then it may have a material adverse effect on AKPS's financial position and operations.

AKPS notes that its construction financing and capital expenditure financing contain defaults triggered by an AMSC default on its take-out financing.

AKPS says it "continues to work with AMSC regarding the timing of the exercise of some of its options for additional tankers."

Start of production for the yard's first unsecured/option vessel (Hull 017) is planned for Spring 2010, but this schedule is dependent upon securing a firm order for this vessel. Although no firm orders are in place, AKPS has made prior purchase commitments on long lead items for Hulls 017-020 as tankers and continues to make commitments on Hull 017 as required by the intended production schedule.

Aker Philadelphia says it "continues to perform strategic evaluations of possible new construction projects for the future. Product and shuttle tankers and containerships remain important prospects in this evaluation. The current global economic crisis has continued to create uncertainties which have delayed the decision making process for new builds and have created difficulties regarding the financing of new build projects. AKPS continues to monitor and assess its vendors, financing partners and customer closely. However, AKPS remains committed to providing the Jones Act market with the most cost efficient merchant vessels possible and believes that it will be the supplier of choice when these vessels are ordered."


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