Wednesday, February 04, 2009
Fortescue and Bocimar settle contract dispute
By Marcus Hand in Singapore - Wednesday 4 February 2009
FORTESCUE Metals Group has settled its shipping contract dispute with Bocimar issuing $22m in shares to the Belgian shipowner, and is entering into a new joint venture with it.
The Australian iron ore miner controversially suspended all its cost and freight contracts of affreightment in early December.
Bocimar had signed deals to charter two capesize vessels to Fortescue, one for five years and another for 10 years.
“Fortescue has reached an agreement with Bocimar to terminate the two contracts entered into in February 2008 which were struck during the previous high shipping market,” Fortescue said.
The Australian miner is issuing $11m worth of shares to Bocimar for each contract based on the closing price as of December 31, 2008. The Belgian shipowner has agreed to drop arbitration proceedings against Fortescue and both companies have agreed the they have no further claims against each other.
“Bocimar agreed to try and negotiate a commercial outcome rather than pursue a legal outcome,” said a spokesman for Fortescue.
At the same time Bocimar and Fortescue have agreed to set up a new shipping joint venture chartering a trio of 180,000 dwt-200,000 dwt capesize bulkers.
“The vessels have been secured at today’s historically low rates, fixed for a 10-year period,” Fortescue said.
As part of the deal the Austalian company will issue a further $28m in new shares to Bocimar at the end of this year based on a weighted average market price basis.
Under the joint venture there will be equal profit sharing from sub-charters and the Belgian shipowner will provide management and advisory.
Bocimar is an existing shareholder in Fortescue and wrote off €35m ($45m) from its share portfolio in 2008, much of which it said came from its holding in Fortescue.
Fortescue’s move to default on all its shipping contracts in December last year have drawn considerable ire from the dry bulk shipping community. The Australian mining company argued that its customers for which it agreed to provide shipping were not willing to pay for freight on ships chartered when the dry bulk market was close to all-time highs.
Dry bulk operator Armada Singapore, which sought protection from creditors in early January, listed defaults for $81m for non-performance of cargo contracts by Fortescue.
It is understood that if the full freight is claimed on the miner contracts, the figure would be closer to $200m.
In December the Angelicoussis Group filed a claim in New York’s Southern district court for damages of $129m from Fortescue, while Classic Maritime sued for $3.8m.
The Fortescue spokesman said that the remaining claims against it were still in arbitration.
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