Tue, Nov 28, 2017 - Page 1 News List

Banks say no to Ching Fu extension

DEFAULT:With banks shutting the door to a loan extension, they could face NT$14.9 billion in bad debts after the navy ends its minesweeper contract with the shipbuilder

By Ted Chen  /  Staff reporter

Minister of Finance Sheu Yu-jer, left, Financial Supervisory Commission Chariman Wellington Koo, second left, and other officials answer questions relating to the Ching Fu Shipbuilding Co corruption case at the Legislative Yuan in Taipei yesterday.

Photo: Fang Pin-chao, Taipei Times

State-run banks yesterday declined to extend the deadline for Ching Fu Shipbuilding Co (慶富造船) to meet its repayment obligations, raising the prospect that the company’s contract to build six minesweepers for the navy would soon be terminated.

Termination of the contract could lead to NT$14.9 billion (US$496.57 million) in bad debts for state-run banks that participated in a syndicated loan to the troubled shipbuilder, the Ministry of Finance said.

The shipbuilder has also secured other questionable loans, such as a separate build-operate-transfer contract for a National Museum of Marine Biology and Aquarium project, bringing banks’ total exposure to the shipbuilder to about NT$20.51 billion, of which more than 70 percent is expected to be unrecoverable, the Financial Supervisory Commission said.

Newly installed First Commercial Bank (第一銀行) chairman Ray Dawn (董瑞斌) and Bank of Taiwan chairman Joseph Lyu (呂桔誠) told the legislature’s Finance Committee that they would not allow an extension for Ching Fu to furnish a NT$7.9 billion advance payment bond as stipulated by its contract with the Ministry of National Defense.

The advanced payment bond is due on Friday, and the NT$35.85 billion minesweeper contract would be automatically terminated should Ching Fu Shipbuilding fail to provide the payment by Friday next week.

In light of Ching Fu’s financial troubles, the two state-run banks have ruled out preserving the contract, Lyu and Dawn said during a question-and-answer session at the legislature.

The shipbuilder has already missed a payment due last month, putting it in breach of contract, Lyu and Dawn said, adding that the company has not been making the required interest payments.

First Bank, which served as lead bank in the syndicated loan, will no longer help the shipbuilder salvage its project, Lyu said.

The Bank of Taiwan will vote against granting an extension as Ching Fu has yet to submit the required information, making it impossible for the bank and other lenders to verify its financial condition, Dawn said.

While a formal meeting with participating banks in the syndicated loan is to take place today, other lenders are expected to follow First Commercial Bank’s decision to cut its losses.

Separately, the Coast Guard Administration (CGA) on Sunday terminated its contract with Ching Fu as the shipbuilder has continued to fall behind in delivering 28 patrol boats and demanded NT$1.2 billion in compensation.

Ching Fu in May 2013 won a CGA tender to build 28 100-tonne patrol boats, and has completed and delivered 13 so far.

The CGA said the shipbuilder failed to meet Sunday’s deadline for delivery of the 14th boat after missing several deadlines earlier.

Ching Fu Shipbuilding chairman Chen Ching- nan (陳慶男) declined to answer reporters’ questions on his way to report to a police station in Kaohsiung, as he is required to do daily.

Chen was arrested in August and released on bail of NT$8 million in the case of suspected loan fraud linked to the minesweeper contract.

Additional reporting by CNA

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