ASX-listed livestock ship owner and charterer Wellard is set to receive an AUD $17 million boost to its bottom line after successfully resolving arbitration over the termination of a ship building contract in 2018.
Wellard released a statement late last week stating that it has successfully resolved its arbitration proceedings in London against the Croatian Bank for Reconstruction and Development (HBOR) and is entitled to receive payments plus interest amounting to approximately AUD $17 million (US $12m) within 14 days.
HBOR issued Wellard’s subsidiary, Wellard Ships Pte Ltd, refund guarantees supporting Wellard’s terminated 2015 contract for the building of the planned livestock vessel to have been known as the M/V Ocean Kelpie with the Uljanik d.d shipyard (Uljanik).
Wellard said that when HBOR disputed payment under the refund guarantees, it was forced to commence arbitration to recover all monies it had paid to Uljanik in respect of the shipbuilding contract, plus costs and interest.
In 2019, however, the Uljanik d.d. shipyard was placed into interim receivership, which proceeded to full insolvency. The result was that the refund was not able to be paid to Wellard, which was an unsecured creditor.
Arbitral proceedings were subsequently commenced against HBOR seeking to enforce the two Refund Guarantees which secure the advance payments made by Wellard to Uljanik.
The Refund Guarantees were for advance payments of US$8.0M and €1.6M made by Wellard, plus interest accruing until full refund is made. The precise amount received will be reported by Wellard in its statutory financial reports.
“Wellard is pleased to have been able to recover these monies after two long and complex arbitrations conducted over several years,” Wellard Executive Chairman John Klepec said.
“This is a fair and appropriate outcome in the circumstances, demonstrating the importance of effective risk mitigation that refund guarantees provide in the ship building industry.”
Wellard said costs in the matter have been reserved, and it will be assessing and claiming its reasonable costs.
The dispute with HBOR was subject to London arbitration with English law applying.
Under the ruling, payment must be made within 14 days.
In an unrelated matter Wellard has confirmed that it has agreed with Ruchira Ships Limited to defer the repurchase of the M/V Ocean Ute from the previously announced date of 24 December 2021 to 25 January 2022.
It said there were no substantive economic or operational change to the transaction.
The completion of the repurchase arrangement on January 25 will mean that from that date Wellard will own the M/V Ocean Ute out right.