U.S.-based offshore vessel operator Hornbeck Offshore Services confirmed Monday it had reached a final settlement agreement with the surety (the “Surety”) for two Multi-Purpose Support Vessels (MPSVs) that had been under construction at Gulf Island Shipyards.
Gulf Island Shipyards (GIS) sued Hornbeck Offshore in 2018 over what it said was the wrongful termination of two shipyard construction contracts for the final two vessels in the company's fifth offshore support vessel (OSV) newbuild program.
Hornbeck said at the time it had terminated the two contracts "because of GIS’s performance issues."
Under the final settlement agreement with the surety, Gulf Island was required to dismiss with prejudice all claims it had asserted against Hornbeck on account of Hornbeck’s termination of the vessel construction agreements with Gulf Island. Hornbeck also dismissed its claims against Gulf Island and the surety under the construction agreements and the surety bonds.
"The Surety has agreed to take over and complete the construction of the two MPSVs at a completion shipyard to be mutually agreed to by the Surety and Hornbeck, and possession of the vessels will be delivered by Gulf Island to the Surety for that purpose," Hornbeck Offshore said.
"Hornbeck’s remaining contractual commitments under the construction agreements that have been taken over by the Surety are approximately $53 million in the aggregate for the two vessels. The Surety will be responsible for all cost of construction in excess of that amount. It is expected that the vessels will be completed in 2025," Hornbeck Offshore said.
Todd Hornbeck, the Company’s president and Chief Executive Officer, commented, “We are very pleased to be able to complete the construction of these two ultra-high-spec, Jones Act-qualified MPSVs. When delivered, these vessels will be the two largest and, we believe, the most capable MPSVs in the U.S.-flagged Jones Act registry and will enhance our ability to support our oilfield, offshore wind and military customers across a broad spectrum of services.”
Gulf Island Fabrication made its announcement on the settlement of the dispute with Hornbeck Offshore Services last week.
It also said that Gulf Island Fabrication, GIS, Fidelity & Deposit Company of Maryland (“FDC”), and Zurich American Insurance Company, the issuer of the performance bonds for the MPSV contracts, had entered into a binding term sheet relating to the settlement of Gulf Island and GIS’s 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 under which which Gulf Island will pay Zurich $20.0 million, plus interest at a rate of 3.0% 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.