Otto Marine’s woes may hit China Shipbuilding Industry unit: report
The possible bankruptcy of Otto Marine may lead to the abandonment of seven ships under construction worth more than 1 billion yuan ($157.67 million) it ordered from a Chinese shipbuilder, according to a report from domestic news website guancha.cn on Monday.
The report said that the Singapore marine group had 29 ships in operation and eight on order.
Seven of those eight were being built by Wuchang Shipbuilding Industry Group Co, an affiliate of Stateowned shipbuilder China Shipbuilding Industry Co.
The Singapore-based group operates a shipyard in Batam, Indonesia, and a fleet of offshore support vessels deployed globally in major oil and gas markets, the Singapore-based Straits Times reported in February.
“We are already discussing the issue with Otto Marine, and there is still a possibility to deliver the orders,” Wang Weiqing, deputy general manager of Wuchang Shipbuilding, told the Global Times on Tuesday.
However, the report said that considering the Singapore company’s bad financial situation, the possibility of making delivery of the ships is quite low, and the vessels may have to be abandoned.
Industry insiders said that ship buyers usually pay 20 percent to 30 percent deposits after signing purchase contracts, with the balance to be paid by delivery. However, the percentage of the deposit may drop to 5 percent in a depressed market.
Influenced by the downturn of the global shipping market, the Chinese shipbuilding industry had great difficulties in financing, delivery and making profits in 2017, and it faces another tough year in 2018, according to a report from the China Shipbuilding Industry Association on January 24.
A report from Dallas-based law firm Haynes & Boone showed that the plunge in oil prices had pushed at least 134 North American oil producers into bankruptcy since 2015, according to a Bloomberg report on February 23.
Saddled with a debt of $877 million, Otto Marine has sought protection from the Singapore High Court to fend off creditors, Bloomberg reported, citing the company’s application for judicial management on February 20.
Otto Marine, established in 1979, has more than 70 entities with subsidiaries, associate companies and indirect subsidiaries in Singapore and abroad.
The company had about $869 million in assets as of the end of last year, and most of them are unlikely to be recovered, the company’s executive chairman Yaw Chee Siew said in the court application.
Its accumulated losses swelled to $203 million as at June 2016, the Straits Times said.