STX Europe Company Update
STX Europe reported on its financial standing, stating:
STX France has recently experienced cost overruns mainly related to one of its cruise vessels under construction at its St Nazaire shipyard. The cost overrun could represent a negative deviation up to $20.3m – 27.1m, but every possible effort is being made to limit such cost overrun. The physical construction of the vessel is however in good progress, and the vessel is expected to be delivered on-time and to the client's full satisfaction. STX France has a solid working capital position, and the funding of such cost overrun will be managed from the existing working capital in STX France. As a consequence of the cost overruns, STX Europe has agreed with Nordea Bank to adjust the interest coverage ratio covenant (EBITDA/Interest) to reflect such a lower expected EBITDA in 2010.
Despite this situation in 2010 the long term outlook for STX France remains unchanged. The company continues to see signs of improvement in the market as illustrated by its recent Letter of Intent with MSC for the construction of a large cruise vessel - being a sister vessel of "MSC Fantasia" and "MSC Splendida" previously built by STX France.
As advised in the 4th Quarter 2009 report STX Europe may have to record additional losses in relation to the bankruptcy of Wadan Yards MTW GmbH in August 2009 and other factors related to the sale of the yards in Germany and Ukraine to FLC West in 2008. Due to the bankruptcy of Wadan Yards Group AS on 16 March 2010, loss provisions of up to approx. NOK 200 million may now have to be recorded. These loss provisions will be write-downs with no cash effect. STX Europe will take every measure possible to limit such losses.