Navy to scrap deal unless Ching Fu pays NT$720m

LITTLE CONFIDENCE: The Ministry of National Defense seized NT$7.2 billion from Ching Fu’s bank account after the company failed to meet a payment deadline

By Aaron Tu and Jonathan Chin / Staff reporter, with staff writer





Ching Fu Shipbuilding Co (慶福造船) is in arrears on bond payment obligations amounting to NT$720 million (US$24 million) and the shipbuilder has until Friday next week to pay them before the government terminates a contract with the firm for minesweepers, the navy said yesterday.

Ching Fu was supposed to pay NT$720 million in advance payment bonds, the first installment for its third-phase obligations, Navy Command Planning Division Chief Rear Admiral Chen Tao-hsing (陳道興) told a news conference at the Ministry of National Defense.

On Monday, bond issuers First Commercial Bank (第一銀行) and other state-run banks refused to grant Ching Fu an extension to furnish the advance payment bond.

Navy Command Planning Division Chief Rear Admiral Chen Tao-hsing, right, answers reporters’ questions about Ching Fu Shipbuilding Co at a news conference at the Ministry of National Defense in Taipei yesterday. Photo: Chu Pei-hsiung, Taipei Times

The bank’s heads told the legislature’s Finance Committee that they have little confidence in the shipbuilder’s ability to repay a syndicated loan it took out.

Following the refusal, ministry inspectors, legal affairs officials and attorneys yesterday morning confiscated NT$7.2 billion from Ching Fu’s account at First Commercial Bank’s Kaohsiung branch, Chen said.

Ching Fu was contractually obligated to pay for bonds worth NT$1.5 billion, NT$3.3 billion and NT$2.4 billion in three phases, Chen said.

After the shipbuilder failed to meet the payment deadline, the ministry confiscated the entire sum, he said.

Ching Fu has also missed the minesweeper program’s milestones, which it must catch up with by Friday next week or the see the contract terminated, Chen said.

Chen declined to comment on the ministry’s plan for its next-generation minesweepers, citing legal concerns, saying only that it would evaluate all options.

A potential roadblock for continuing the locally built minesweeper project is that US-based Lockheed Martin and Italy-based Intermarine had obtained technology export permits exclusively for Ching Fu, Chen said.

The ministry would have to renegotiate the export permits for US combat systems and Italian hull technology, assuming another contractor will take over the project from Ching Fu, Chen said.

Keeping Ching Fu on board with the program has become “practically impossible” at this point, Chen said.

The ministry would need to reopen bidding for the minesweepers before it can find another contractor or draw up a new contract, he said, adding that the alternative is to scrap the program.

Top naval officers are giving serious thought to abandoning the project in favor of upgrading the existing fleet, a ministry official told the Liberty Times (the sister newspaper of the Taipei Times) on condition of anonymity.

Handing the contract to another shipbuilder would delay the project by two to three years and might reflect negatively on the government should Ching Fu take the decision to court, the official said.

Potential alternatives to Ching Fu include CSBC Corp, Taiwan, Jong Shyn Shipbuilding Co and Lung Teh Shipbuilding Co, the official said.

Additional reporting by Su Yung-yao and Lo Tien-pin