June 21, 2009
Austal set to take $23 million hit on Hawaii Superferries
Hawaii Superferry is seeking to literally abandon ship (or in this case ships). As a result shipbuilder Austal is set to take a $23 million hit.
Hawaii Superferry, which filed for Chapter 11 bankruptcy May 30, has filed a motion to release its financial interest in the ferries Alakai and Huakai, citing the expenses of maintaining them.
"It is unclear if there is any equity in the vessels given current market conditions, and the debtors do not have sufficient liquidity at this time to continue to maintain the vessels while waiting for market conditions to improve," the motion said.
Saying that Superferry is incurring significant costs, the motion stated that "the debtors in their business judgment have determined that abandonment of the vessels is appropriate since the vessels constitute a burden to the estate."
A hearing on the motion is set for July 1.
The motion noted that, as of its May 30 bankruptcy filing, the company owed $135.8 million to the U.S. Maritime Administration through a guaranteed loan that provided financing to construct the vessels. Austal, the second lien holder, is owed $23 million through two term loans.
In a stock exchange announcement on July 19, Austal noted that "after discussions with a number of parties in an attempt to re-organize the affairs of HSF, it now appears unlikely that HSF will continue as a charter operation. Austal has a second secured position to the U.S. Department of Transportation Maritime Administration (MARAD) over the vessels but in the current market conditions it is not anticipated there will be sufficient funds on disposal of the vessels to recover Austal's loan. A total write off of this loan will result in a further US$18 million write down in addition to the US$5 million provided for at 31 December 2008."
"The repayment of the HSF loan was not due before 2013 and therefore this does not have an impact in Austal's short term cash flow nor its ability to pay a dividend for the year," said the announcement.