The Singapore based Dongfang Shipbuilding is drowning in financial debts which have resulted in the decision of the Credit Suisse and a group of Chinese banks to seize seven of Dongfang Shipbuilding’s tankers, Reuters reported.
This is not the first instance of such a decision on the part of Chinese banks, which previously seized Dongfang‘s three tankers due to an outstanding debts of 1.3 billion yuan ($204.07 million).
Despite various orders from its European clients Dofgang’s failure to meet its financial obligations caused the said orders to get cancelled and thus provoked the loss of creditors’ trust last year. As a result Dongfang ended up with around $250 million of debt which had to be paid one way or another.
Therefore, the creditors opted for a legal remedy to their problem which was resolved by the Singapore Supreme Court’s ruling in their favor.
Triggered by the inability of the company to repay $42 million of debt, which was the last straw, and taking into account the shortage of financial means to repay the debt, the creditors resorted to confiscating Dongfang’s tankers since May 26.
Moreover, last week Dongfang was delisted from the alternative investment market of the London Stock Exchange, after several months-long battle to keep its position.
The overall downfall of the shipping industry prompted by the decline in ship financing and plunge of freight rates hit numerous shipbuilding companies in China which are projected to go bankrupt or be acquired by larger rivals such as China Shipbuilding Industry Corp, China Rongsheng Heavy Industries and Yangzijiang Shipbuilding.
($1 = 6.3705 Chinese yuan)
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World Maritime News Staff, June 11, 2012; Image: Dongfang