Gulf Island Fabrication said Thursday that its subsidiary, Gulf Island Shipyards, had resolved its lawsuit with the U.S. offshore vessel operator Hornbeck Offshore Services relating to the construction of two multi-purpose supply vessels (“MPSV”).
Gulf Island Shipyards (GIS) sued Hornbeck Offshore in 2018over 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."
In a statement on Thursday announcing the settlement, Gulf Island Fabrication said: "In connection with the resolution, the court dismissed the lawsuit at the request of the parties to the litigation."
Further, Gulf Island, GIS, Fidelity & Deposit Company of Maryland (“FDC”), and Zurich American Insurance Company, the issuer of the performance bonds for the MPSV contracts, 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 pursuant to 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 commencing on December 31, 2024. Gulf Island and GIS also agreed to release possession of the MPSVs to Zurich.
“We are pleased to be putting this matter behind us and believe this resolution is in the best interest of all of our stakeholders,” said Richard Heo, Gulf Island’s President and Chief Executive Officer.
“The resolution will eliminate ongoing legal and vessel holding costs and remove the uncertainty and risk of a potential adverse outcome inherent in any jury trial. The agreement with Zurich for payments over fifteen years will position us to remain in a strong financial position with sufficient liquidity to continue to pursue our strategic objectives. Importantly, the resolution removes a significant distraction, which, combined with the completion of the wind-down of our shipyard operations, will enable us to focus our efforts on profitably growing the business,” concluded Heo.