March 19, 2010
STX Europe reports cost overruns at French shipyard
STX Europe says that STX France has recently experienced cost overruns mainly related to one of its cruise vessels under construction at its St Nazaire shipyard. The cost overrun could run as high as EUROS 15 - 20 million, but every possible effort is being made to limit it. Meantime, actual construction of the vessel is making good progress, and the vessel is expected to be delivered on-time and to the client's full satisfaction.
STX Europe says that STX France has a solid working capital position and the cost overrun will be managed from the existing working capital in STX France. However, it says that as a consequence of the cost overruns, STX Europe has agreed with Nordea Bank to adjust the interest coverage ratio covenant (EBITDA/Interest) to reflect such a lower expected EBITDA in 2010.
The long term outlook for STX France is described as "unchanged." The company continues to see signs of improvement in the market as illustrated by its recent Letter of Intent with MSC for the construction of a large cruise vessel.
STX Europe notes that, a advised in the Fourth Quarter 2009 report may have to record additional losses in relation to the bankruptcy of Wadan Yards MTW GmbH in August 2009 and other factors related to the sale of the yards in Germany and Ukraine to FLC West in 2008. Due to the bankruptcy of Wadan Yards Group AS on March 16, 2010, loss provisions of up to approx. NOK 200 million may now have to be recorded. These loss provisions will be write-downs with no cash effect. STX Europe will take every measure possible to limit such losses.