Maritime Administration to repossess Hawai’i Superferry

Government to repossess Hawaii Superferry boats built at Austal

Wednesday, June 24, 2009
By KAIJA WILKINSON
Business Reporter

The U.S. Maritime Administration says that it plans to repossess and sell a pair of fast ferries built at Austal USA for Hawaii Superferry Inc.

Hawaii Superferry owes $136.8 million to the agency – commonly known as MARAD – which guaranteed the loans used to buy the ferries. It has another $22.9 million outstanding on a pair of loans from Austal.

MARAD reported this week that it plans to take possession of the ferries, now docked at Atlantic Marine in Mobile, as soon as it receives approval from bankruptcy court in Delaware. Hawaii Superferry Inc. filed for Chapter 11 reorganization in that state May 30.

The ferry vessels were purchased in 2004 for a combined price of $190 million, according to Austal, which now puts their value at about $87 million each, or $174 million together.

Austal Ltd., the Australian parent company of the Mobile shipyard, said Tuesday that it is writing off about $11 million, after taxes, for the 2008-09 fiscal year related to its ferry loans.

Talks among MARAD, Austal and Hawaii Superferry broke down last week, Austal officials said.

Maritime analysts had expected the ferry vessels to be retrofitted by Austal and chartered directly to the military. Jay Korman of The Avascent Group, a Washington, D.C., consulting firm that tracks defense programs, said Tuesday that MARAD is opting to sell the vessels rather than charter them directly, in order to recoup at least some of the costs for taxpayers.

Austal Ltd. President Bob Browning said he was disappointed that MARAD decided to seize the ferries without involving Austal in a project to prepare them for military use.

MARAD made the ferry loans under its Title XI program, which is supposed to support U.S. shipyards by reducing their reliance on military work.

Browning said that Austal approved lending $23 million to the ferry venture in part because the deal would help raise the profile of Austal’s U.S. shipyard, which at the time had been operating in Mobile for only a few years. Although it succeeded in doing that – the Mobile shipyard in November won a potential $1.6 billion contract to build up to 10 high-speed fast ferries for the military – Browning said the company’s lending days are over.

When launched in 2007, the Hawaii Superferry venture was hailed as ushering in a new era of inter-island transportation in Hawaii. The first ferry vessel was in service for about a year despite fierce environmental protests and low occupancy.

The Hawaii Supreme Court in March overturned a ruling that had allowed the ferry to function pending an environmental impact study. Hawaii Superferry Inc. ceased operations a short time later.

The company, whose primary investor is former Naval Secretary John Lehman, said subsequently that it planned to charter one or both of the ferries to a military or commercial client.

Source: http://www.al.com/news/press-register/metro.ssf?/base/news/124583492475240.xml&coll=3

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