Pennies on the Dollar...Tone...No More Ohana

Derrick DePledge has a good blog entry today on this:

Pennies on the dollar
June 29th, 2009 by Derrick DePledge

Hawaii Superferry filed an objection today in U.S. Bankruptcy Court in Delaware to the state of Hawai’i’s request that the case be transferred to the Islands.

Attorneys for Superferry argue that the major secured creditors -- the federal Maritime Administration and Guggenheim Corporate Funding -- prefer that the case remain in Delaware.

The filing is interesting for its tone...

[Click on Pennies to see rest of Derrick's post]

Derrick quotes from the filing today to give a sense of the tone.

Latest from the Coconut Wireless on this

Forwarded:

Navy Seeks Ferry Vessel for Pacific Operations

The U.S. Navy’s Military Sealift Command (MSC) has issued a Market Survey to ask about the cost and availability of U.S. ferry vessels. Anticipated delivery will occur on October 1, although the vessel owner may propose alternate delivery dates. The location of proposed usage will be Guam, Saipan, and adjacent Pacific Ocean waters. The time charter will be for 12 months, with the possibility for three additional year-long renewals.

The closing date for responding to the Market Survey is July 14, 2009.

For more information, contact Ms. Jessica Chu of MSC at 202-685-xxxx (phone) or Jessxxx.xxx@navy.mil.

PVA has a copy of the Navy’s full document with the Market Survey. For a copy, contact Ed Welch at PVA Headquarters at 1-800-807-xxxx ext. xx or ewxxxx@passengervessel.com

State Startin' to Look Like the Odd One Out on This

From: http://www.netdocketsblog.com/2009/06/hawaii-superferry-challenges-transfer.html

Monday, June 29, 2009

Hawaii Superferry Challenges Transfer Motion

On Monday, Hawaii Superferry, Inc. and HSF Holding, Inc. filed an objection, accompanied by a memorandum of law, to the motion of the State of Hawaii seeking the transfer of their bankruptcy cases from the bankruptcy court in Delaware to the bankruptcy court in Hawaii. Hawaii Superferry filed for bankruptcy protection in Delaware on May 30, 2009 and the State of Hawaii sought the transfer on June 19th. Details of the State of Hawaii's transfer motion can be found in an earlier posting, which is available here.

In support of its objection, Hawaii Superferry makes several arguments. First, the company asserts that venue is proper in Delaware because HSF Holding, Inc. was formed as a corporation under Delaware law. Second, the company states that its two largest secured creditors - the United States Maritime Administration and Guggenheim Corporate Funding, LLC - support the cases remaining in the Delaware bankruptcy court. In fact, the United States Maritime Administration quickly filed a joinder in support of Hawaii Superferry's objection. The objection also notes that MARAD holds a secured claim in excess of $136 million and Guggenheim holds a secured claim of $50 million, while the State of Hawaii asserts a disputed third-lien claim of only $1.3 million. The objection suggests that such third-lien claims are likely to be out of the money.

Finally, Hawaii Superferry challenges the assertions made by the State of Hawaii that there is a strong connection between the companies and the State of Hawaii. While that may once have been the case, according to Hawaii Superferry, the companies have ceased all operations in Hawaii and no longer maintain any significant connection to Hawaii. According to the companies, they ceased all operations in Hawaii in March following an adverse court ruling that prohibited their continuing operation, they have laid off all employees in Hawaii and none of their assets remain in Hawaii (most notably, their most significant assets - the high-speed ferries - are now docked in Alabama). Hawaii Superferry also challenges the assertion that most of its creditors are located in Hawaii, noting that less than half of its 30 largest unsecured creditors (and two of the three members of the Official Committee of Unsecured Creditors) are located outside of Hawaii. Finally, the company notes that both its retained professionals and the Creditors' Committee's retained professionals are located in Philadelphia, New York, Washington, D.C., and Wilmington.

Download copies of every document filed in this case and the bankruptcy cases of over 600 other major corporations using netDockets.

Posted by Randall Reese

Latest on the bankruptcy: Couple of good articles and one great blog post

Kaija Wilkinson in Alabama and Derrick DePledge in Honolulu put out a couple of good articles today:

Government to repossess Hawaii Superferry boats built at Austal
al.com - Birmingham, AL, USA
By KAIJA WILKINSON The US Maritime Administration says that it plans to repossess and sell a pair of fast ferries built at Austal USA for Hawaii Superferry ...

Hawaii Superferry wants to abandon both its catamarans
Honolulu Advertiser - Honolulu, HI, USA
By Derrick DePledge Hawaii Superferry has asked to abandon its two high-speed catamarans to creditors because of the significant cost of maintaining the ...

But, even better was the blog post by Ian Lind:

Tuesday…City rail symposium disappoints, and documents from furlough lawsuit and Superferry bankruptcy
By Ian Lind
... Then a few tidbits from the Hawaii Superferry bankruptcy case: The State of Hawaii’s motion to move the case back to the islands, a copy of the Superferry’s security agreement with the Federal Maritime Administration, and an affidavit by the corporate secretary filed for the opening bankruptcy hearing spelling out the company’s financial structure. ...

Ian provides the above links to three interesting documents.

Of note, in "the company’s financial structure" linked document, the chronology of events presented for August 2007 are materially incomplete: "...Thereafter, in August, 2007, the Alakai began transporting passengers and vehicles between the Islands. The special interest plaintiffs appealed the matter to the Hawaii Supreme Court, which, in its August 31, 2007 decision, held that DOT erred in holding that the DOT improvements were exempt from the requirements of Chapter 343."

The Supreme Court's oral opinion came down actually on August 23rd, 2007. The above linked filing makes it seem like the company started operations and then the Supreme Court ruled, when in fact, the Supreme Court decision came down first and the company ignored it and initiated expedited operations anyway on August 26th and only stopped a couple days later when a restraining order was issued by Circuit Court.

In the "motion to move the case back" linked document regarding the fact that HSF voluntarily ceased operations and that the complete Harbors Operating Agreement was not formally voided by a Court nor the State, here's the key quote from the State's Motion to move the case to Hawaii:

"Moreover, the validity of the Harbors Operating Agreement depends solely upon interpretation of relevant Hawaii state law.[3] -- [3] By way of further explanation, there are several complex issues surrounding the Harbors Operating Agreement that are relevant to the Debtors' bankruptcy, including: (1) whether the Hawaii Supreme Court's decision renders the Harbors Operating Agreement void ab initio in light of Superferry's performance pursuant to the terms of the agreement between the passage of Act 2 and the Hawaii Supreme Court's decision; (2) that the Hawaii Supreme Court had yet to enter any judgement with respect to its March 16, 2009 decision and that the prior injunction issued by the lower court with respect to the declaration that the Harbors Operating Agreement was void as to the Island of Maui was set aside, and therefore, in light of the automatic stay there is no current order on record which addresses the Harbors Operating Agreement, thus making Superferry's cessation of business operations on March 16, 2009 essentially voluntary in nature; and (3) the treatment of the State's claims under the Harbors Operating Agreement during those periods in which Superferry operated pursuant to the terms of the Agreement and was not otherwise prohibited by any court order or judgement."

Lastly, of lesser importance, on a side note, in "the company’s financial structure" it is interesting to note the detailed description of the company's Cash Management Accounts including with (no doubt former) account numbers and a good description of the "sweep" process. It is interesting to note that those type of "sweep" accounts were an innovation brought to Hawaii by Bank of America and apparently later adopted by Bank of Hawaii, the institution mentioned in the above linked document.

State of Hawaii seeks change of venue in Superferry bankruptcy

From: State wants Superferry bankruptcy case moved to Hawaii

The liquidation of Hawaii Superferry Inc., a former operator of high-speed ferry service between the islands of Oahu and Maui, should be transferred to Hawaii from Delaware, where the company filed under Chapter 11 on May 30, according to a so-called change-of-venue motion filed Saturday by the state of Hawaii. (8:11 a.m.) More »

Two good blog posts on Hawaii Superferry and Austal

I added my comments to their timely, good blog posts:

Springbored's Springboard: First Shipbuilding Contract Of The Mabus/Work Era?
By Springbored
The U.S. Navy awarded Austal a $99.5 million contract add-on Friday to order long lead-time materials for its third and fourth Joint High Speed Vessels, military transport ships that are part of a potential $1.6 billion, ... Springbored's Springboard - http://springboarder.blogspot.com/

Disappeared News: US Maritime Administration reported moving to seize two Hawaii Superferries
By Larry Geller
[Austal] chief executive Bob Browning said yesterday talks with the US Maritime Administration, which ranks above Austal as a secured creditor of Superferry, had “come unstuck” in the past 24 hours. It is understood the USMA, ... Disappeared News - http://disappearednews.com/

My Comment to Larry's blog:
If Austal bought them for the outstanding load value, it would be at a discount. They could resell them and recoup their losses, but it would tie up $135 million for as much as a year.

If Lehman were allowed to buy them and lease them to the military, he could get both of them at a discount of $135 million and begin to recoup some of the losses he had with HSF.

If the DoD bought them at $135 million, starts using the Huakai in the short-term and the Alakai by the end of the year after retrofit, they would be getting them at a steal, for $75 to 80 million each, considering they are prepared to shell out $185 million for just one JHSV from Austal.

I think the most likely buyer is the DoD, or MARAD just pays off the bonds and leases them to the military.

If these vessels are attempted to be deployed commercially, it would need to be on routes of 30 to 75 miles to have a chance at viability. It is much more likely that they would be useful militarily rather than commercially... as was always the case. posted by MauiBrad : 4:43 PM HST

Recent Headlines on HSF's Bankruptcy and Austal

Creditors criticize Superferry plan Hawaii Business Starbulletin.com June 19, 2009
Hawaii Superferry filed a motion in federal Bankruptcy Court last week seeking approval ... The Superferry cited a lack of liquidity and costs for insurance ...

Austal awarded $99.5 million for LLTM for second and third JHSV's June 19, 2009
Marine Log - New York, NY, USA
The LLTM procured or manufactured for construction or installation in JHSV 2 and 3 will be subsumed with their associated costs into their respective ship ...

Austal cops US $11m Hawaii hit June 20, 2009
The West Australian - Perth, Australia
Listed shipbuilder Austal will take a $US11 million ($13.85 million) hit to its 2008-09 bottom line after rescue talks with the major secured creditor of collapsed customer Hawaii Superferry broke down at the last minute...

Business briefs June 20, 2009
Honolulu Star-Bulletin - Honolulu, HI, USA
"Superferry builder writes off loans"
Australia-based Austal Ltd., whose US subsidiary built the two Hawaii Superferry ships in Mobile, Ala., said yesterday it now will write off the entire $23 ...

Austal set to take $23 million hit on Hawaii Superferries June 21, 2009
Marine Log - New York, NY, USA
Hawaii Superferry is seeking to literally abandon ship (or in this case ships). As a result shipbuilder Austal is set to take a $23 million hit. ...

Couple more blog entries to be referenced in my next post.

Lot of hits out of Australia here in the past 24 hours

If I had to guess I would say some of the most serious bidders to buy the two vessels A615 and A616 out of Bankruptcy Court may come from Australia. There have been an unusual number of hits on this blog in the past 24 hours from commercial and other sites out of Australia. It's not the normal interest that this site gets from there. FWIW, Brad

Liquidation?

From: http://www.starbulletin.com/business/20090617_Abandon_ships.html

"Abandon ships"
Bankrupt Hawaii Superferry seeks court approval to abandon its two vessels
By David Segal Honolulu Star-Bulletin June 17, 2009

The Hawaii Superferry, anchored in bankruptcy in a Wilmington, Del., courtroom, is seeking to literally abandon ship about three months after legal and environmental obstacles forced it to cease operations in the islands...>>>Rest of Article>>>

[The previous Circuit Court ruling only voided the Kahului portion of the Harbors Operating Agreement.--Ed.]

Just saw this online timeline

Don't know who did this, but it's a pretty good timeline. Heavens knows there's almost too much s**t to remember on this story. This timeline is a pretty good review.

By my calculations this thing can do between 50 to 60 knots

From: http://www.bymnews.com/news/newsDetails.php?id=55804

"Austal designed & built Independence sea trials imminent"
Wednesday, June 10, 2009

Sea trials of the US Navy’s landmark Austal-designed and built 127-metre Littoral Combat Ship “Independence” (LCS 2) are expected to commence within weeks following the successful light off of the vessel’s main engines.

Austal completed light off of the vessel’s four propulsion engines - two 22,000kW GE LM2500 gas turbines and two MTU 9,100kW 20V 8000 M71 diesels - following the fuel load and the testing of all four generators.

Activation and testing of the combat and other systems onboard “Independence” is continuing at Austal’s US facility in Mobile, Alabama, with delivery of the vessel expected later in the year...

The vessel’s GE LM2500 gas turbines each develop 22,000kW (29,500 bhp). More than 750 of these gas turbines power the US Navy’s fleet, making it the standard workhorse engine in almost all US Navy surface combatant ships. In addition, they are installed in more than 400 other ships in 30 countries, including an Austal-designed and built fast ferry operating in Denmark. Delivering up to 9,100kW (12,200 bhp) of continuous power, the vessel’s MTU Series 8000 diesel engines...


From: http://www.navytimes.com/news/2009/06/navy_lcs2_lightoff_060809w/

"Technicians light off LCS 2's engines"

By Philip Ewing - Navy Times Staff writer
Posted : Wednesday Jun 10, 2009

Shipyard technicians in Mobile, Ala., have started up the main propulsion plant aboard the littoral combat ship Independence, a milestone toward the ship getting underway this summer for sea trials, shipbuilder General Dynamics announced Monday.

Engineers tested and ran all the components that make up Independence’s combined diesel and gas plant — known as CODAG — including its twin MTU M71 diesels, twin LM 2500 gas turbines, drive shafts and the water jets that propel the ship.

Independence’s diesel engines are the most powerful high-speed diesels in the world, according to an announcement from Austal USA, which built the ship...

Just now takin' down the Kaua'i facilities

From: Maury King

On our visit to Kauai this week, I wanted to visit Nawiliwili Harbor

to see where all the action took place, and it just happened

to be the day they were dismantling all the Superferry stuff.

Quite a lovely sight, I must say.

Maury King

SouthMauiSustainability.org

Kauai09-ByeByeAlakai.jpg

"Somewhere in this pile of @&*% there's a pony"

There have been a number of inaccurate articles on this out there. Here's a 'short and sweet' best article yet on the bankruptcy.

From: http://www.al.com/business/press-register/index.ssf?/base/business/1243934147145370.xml&coll=3

"Austal, Maritime Administration weigh next step after Hawaii Superferry files Chapter 11"

Tuesday, June 02, 2009

By KAIJA WILKINSON
Press-Register Business Reporter

Austal USA and the federal Maritime Administration, the entities that financed construction of two high-speed, passenger-vehicle ferries for Honolulu-based Hawaii Superferry Inc., are weighing their next moves after the company's bankruptcy filing over the weekend.

Hawaii Superferry has $136.8 million outstanding on two MARAD loans, and $22.9 million outstanding on a pair of loans from Austal, according to the filing. In addition, Austal agreed to defer a $1.6 million final payment that was due at delivery of the second vessel.

The company also owes Austal $78,198 in travel and labor costs, court documents say.

The first ferry operated in Hawaii for about a year amid environmental controversy, low volumes and numerous stops and starts.

Hawaii Superferry suspended the service in late March and sent the first ferry back to Mobile – specifically, to Atlantic Marine, the shipyard owned by John F. Lehman, a former Navy secretary and the venture's largest private investor.

That ferry was joined a few weeks later by her sister ship, which went straight from Austal to the shipyard only a few miles away.

Hawaii Superferry's plan was to charter one or both of the ferries, but that plan hasn't materialized as quickly as hoped, and the company and its parent, HSF Holding Inc., filed for Chapter 11 protection in Delaware on Saturday.

Hawaii Superferry listed assets between $1 million and $10 million and debt of $50 million to $100 million. The company said in a statement that a Hawaii Supreme Court ruling that caused the vessel to cease operations doomed the business.

Their future may indeed be with the military, industry watchers have said.

Austal late last year was awarded a potential $1.6 billion contract for so-called Joint High Speed Vessels, which are similar in design to the Hawaii Superferry. The first one is not scheduled for delivery until 2011.

Defense Secretary Robert Gates said in April that he intended to charter two fast ferries to transport troops and equipment, while up to 10 of the Joint High Speed Vessels are being built at Austal USA.

Upon news of the bankruptcy, industry analyst Tim Colton said on his blog that "now that HSF is broke, MARAD can take title to the two ships, pay off the bondholders and maybe charter them directly to the Navy."

Susan Clark, a MARAD spokeswoman in Washington, D.C., said the administration can indeed foreclose on the vessels once it assumes the debt or pays off the obligations.

However, she said, "it is too preliminary in the process to determine what other options may be available."

Austal officials, as well, said it's too early to say how they will proceed or what future role Austal might play.

Here was the full quote from Tim Colton's blog entry on this:

HAWAII SUPERFERRY FILES FOR BANKRUPTCY

End of the HSF story. Read the report in the Honolulu Advertiser here. Read the filing here. Now that HSF is broke, MARAD can take title to the two ships, pay off the bondholders and maybe charter them directly to the Navy. Somewhere in this pile of @&*% there's a pony. May 31, 2009.

By Air rather than by Sea, better than waterborne ferries here?

See video

How else does Austal win? Let us count the ways

They get $704 million and counting for one vessel that was suppose to cost $220 Million:

From: http://www.navytimes.com/news/2009/06/defense_lcs_costs_060109/

"Cost estimates rise for first LCS ships"
by Christopher P. Cavas - Navy Times Staff writer
Monday June 1, 2009

The estimated cost of the first of the Navy’s Littoral Combat Ships rose a modest $6 million over the past year, but the price tag to complete the second LCS jumped $68 million, putting the ship over the $700 million mark, Pentagon budget documents show.

The price to build, outfit and deliver the Freedom (LCS 1) now is $637 million, up from last year’s estimate of $631 million. The ship was delivered to the Navy last September and commissioned in November, but the service and shipbuilder Lockheed Martin will continue to complete the warship well into 2009, as intended.

The price tag for the Independence (LCS 2), however, is pegged by the Navy at $704 million, up from last year’s mark of $636 million. The ship is still under construction at Austal USA in Mobile, Ala....

The Navy did not respond by press time to queries as to why the cost for LCS 2 jumped more than 9 percent over the past year.

Started at $220 Million

The price tag for each LCS has been a key element of the program since 2004, when the Navy said each of the ships was to cost $220 million — a relatively low figure in a Navy whose destroyers cost well over $1 billion. The low cost is a cornerstone of the Navy’s plan to buy a total of 55 LCS ships, or about one-sixth of the planned 313-ship Navy. The program envisioned a competition to build two very different types of LCS — a steel and aluminum monohull design from Lockheed Martin, and an all-aluminum tri-hull ship from General Dynamics — and at an unspecified point selecting one design...

Austal Chairman thinks they're in the Captain's Chair

The following was my response to Larry Geller's

Superferry bankruptcy pre-determined?

Well said Larry.

The one winner in this appears to be Austal if not also some of the other preferred stockholders. Austal's Chairman told the Western Australian press today that they think they will get control of the two vessels out of this. If that happens, I'd say they are the win-win winners in this for the time being. They got the contracts, proved the construction capability with A615 and A616, and they think they will get the vessels too. See article:


"Austal customer bankrupt, owes $26.3m" * June 2, 2009

Shipbuilder Austal Ltd does not expect to find itself out of pocket after one of its customers filed for Chapter 11 bankruptcy in the United States.

Ferry charter operator Hawaii Superferry has filed for bankruptcy in the US Court of Delaware, owing Austal $US21.3 million ($A26.3 million).

The loan was provided by Austal as part of a deal to sell Hawaii Superferry two high-speed vessels.

Austal said in a statement on Tuesday that Hawaii Superferry would attempt to reorganise its affairs to allow it to continue as a going concern.

"If the business continues to operate, the chances of Austal getting its money back eventually are high," Austal executive chairman John Rothwell told AAP.

Mr Rothwell said it was likely that ownership of the vessels would return to Austal, which would then charter them to the US Department of Defence.

Austal holds a second registered mortgage over the vessels, ranking it as a creditor behind the US Maritime Administration...


So the Aussies think these two vessels would be most useful to the US DoD. This reminds me of the fast cat designs that another Aussie firm sold to the Chinese which were reengineered into fast attack class vessels. I'd say the Aussies so far have played all sides on this pretty well, the Chinese, Americans, Hawaii, Alabama, DoD, and JFL. What remains to be seen is how well aluminium performs under fire. I'm guessing it will eventually fail if the Falklands War offered any lessons. In the meantime halfwitted decendents of prisoners will have hoodwinked both the Chinese and Americans, Hawaii and Alabama to spend money on things they don't need.