Gulf Island Shipyards (GIS), a subsidiary of the U.S.-headquartered Gulf Island Fabrication, has settled a lawsuit with Hornbeck Offshore Services regarding the construction of two multi-purpose supply vessels (MPSVs).
In connection with the resolution, the court dismissed the lawsuit at the request of the parties to the litigation. In line with this, Gulf Island, GIS, Fidelity & Deposit Company of Maryland (FDC), and Zurich American Insurance Company, the issuer of the performance bonds for the MPSV contracts, entered into a binding term sheet related to the settlement of Gulf Island and GIS’ obligations under the performance bonds and any indemnity agreements relating to such bonds.
In exchange, Gulf Island and Zurich will enter into a note agreement pursuant to which Gulf Island will pay Zurich $20 million, plus interest at a rate of 3% per annum, payable in fifteen equal annual installments starting on December 31, 2024. Gulf Island and GIS also agreed to release possession of the MPSVs to Zurich.
Richard Heo , Gulf Island’s President and Chief Executive Officer, commented: “We are pleased to be putting this matter behind us and believe this resolution is in the best interest of all of our stakeholders. The resolution will eliminate ongoing legal and vessel holding costs and removes the uncertainty and risk of a potential adverse outcome inherent in any jury trial.
“The agreement with Zurich for payments over fifteen years will position us to remain in a strong financial position with sufficient liquidity to continue to pursue our strategic objectives. Importantly, the resolution removes a significant distraction, which combined with the completion of the wind-down of our shipyard operations, will enable us to focus our efforts on profitably growing the business.”
While Gulf Island got its hands on a large fabrication contract for an offshore project in the Gulf of Mexico in September 2022, Hornbeck has been working on expanding its fleet. To this end, the firm inked a deal in January 2022 to acquire ten OSVs from affiliates of Edison Chouest Offshore with deliveries slated to take place over the following 12 to 15 months.
The company expanded its fleet further a month later by adding three OSVs to its fleet after an auction carried out by the U.S. Department of Transportation’s Maritime Administration (MARAD).