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Horizon Shipbuilding files for Chapter 11 bankruptcy protection

Nov 2, 2017 01:22 PM

Creditors include prominent fleet operators Hornblower and McAllister Towing

(MOBILE, Ala.) — Horizon Shipbuilding of Bayou La Batre, Ala., has filed for Chapter 11 bankruptcy protection. 

The filing, on Oct. 24 in U.S. Bankruptcy Court in Mobile, came about a month after the company announced it was losing money building high-speed ferries for Hornblower's NYC Ferry service. At the time, Horizon said it could not reach agreement with Hornblower to restructure the deal. 

Court filings suggest issues with a contract to build three tugboats for McAllister Towing pushed Horizon into bankruptcy. The yard delivered the 6,770-hp tug Capt. Brian A. McAllister this summer but work had stopped on two other tugs.

The shipyard blamed the work stoppage on its "financial inability to continue without a major restructuring of the (contract) terms." McAllister responded by issuing a default notice and also warning the shipyard it planned to terminate the contract for the two remaining vessels. 

"The debtor has cited the impending termination of the shipbuilding agreement as the reason for its Chapter 11 filing," McAllister's attorneys said in a court filing.

Subcontractors awaiting payment have "asserted" liens on the undelivered tugboats, according to McAllister's filing.  

Horizon and Metal Shark of Louisiana won contracts with Hornblower to build 19 high-speed catamaran ferries for the New York commuter service. Horizon delivered the 10 ferries scheduled for 2017, but up to three more vessels were set for arrival next year. The status of those ferries could not be confirmed. 

Meanwhile, Hornblower has hired Metal Shark to build five more ferries, including four 97-foot, 350-passenger boats. 

“As Horizon works through its current situation, we wish them well," Hornblower said in a prepared statement. "Should their situation change, we would welcome the opportunity to work their them again in the future.”

Horizon Shipbuilding CEO Travis Short said Thursday that the shipyard believed its bid for the Hornblower ferries was sufficient to cover their costs. However, in February, the yard realized the vessels were requiring more labor than expected. 

"Shortly thereafter the substantial use of contract labor was also necessary to support the extremely aggressive delivery schedule," Short said in a prepared statement. "Hornblower was immediately notified of the financial issues and Horizon diligently attempted to find a solution. Possible price adjustments on vessels in production at the time as well as price adjustments on future vessels were consistently provided by Hornblower, through discussions with NY EDC (New York City Economic Development Corp.), until the 10th ferry was delivered in September."

Short said issues with the McAllister tug project stemmed from cost uncertainty around building one of the first Tier 4 tugboats in the U.S. 

"The resulting labor and material costs for one the first Tier 4 installations in the country were much higher than anticipated for a firm fixed-price contract without price modification," Short said, noting that the shipyard expects to emerge from bankruptcy. 

"With the soft shipbuilding market, Horizon anticipates a moderate recovery but recovery remains our goal," he said. "Unfortunately, Horizon is experiencing a back-to-back loss and a Chapter 11 filing that most shipyards can appreciate but, at the end of the day, we are as good as any boatbuilder out there.”

The shipyard's Chapter 11 filing aims to restructure the company's debt rather than liquidate. Horizon said it owes money to between 100 and 199 creditors. It also lists assets between $1 million and $10 million and estimates its liabilities are within the same range. 

Creditors listed in the bankruptcy filing include HNY Ferry Fleet, McAllister Towing, Markey Machinery and Schottel among many others. The news publications Maritime Reporter and Waterways Journal are among the firms Horizon owes money. 

McAllister Transportation declined to comment. 

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