Ananda Shipyard, which has fallen on hard times after orders for eight vessels worth about Tk 700 crore were cancelled in 2010, is now planning to rent out two of the ships to service its loans with Islami Bank.
The shipbuilder is currently looking to register the two liners at a foreign country and then lease them out to European patrons, Tariqul Islam, executive director of Ananda Shipyard and Slipways, said.
“There were bureaucratic tangles, but we have overcome them recently. Our ultimate aim is to find buyers for those ships.”
Just like individuals, merchant ships too need to obtain 'passports' to ply international waterways, a process which is called ship registration. The vessel will be registered to a country, dubbed the flag state, to whose laws it would be bound to.
The flag state will regularly inspect the ship to certify its equipment and crew and issue safety and pollution prevention documents.
Ananda aims to get the vessels registered at Panama, currently the world's largest flag state, owing to the Central American nation's easy registration process, cheap labour and tax benefits.
Failing that, the shipbuilder will look to Liberia, Marshall Islands, Hong Kong or Singapore, according to Islam.
“Those countries have tax benefits and registration is much easier than many countries including Bangladesh. Maybe, we will also get prospective buyers for our ships there.”
Islam said the ships would be mortgaged in favour of its financier Islami Bank.
Earlier in 2007, the Ananda Group concern received orders from German and Singaporean buyers for eight ships worth $89.4 million or about Tk 700 crore, to be delivered between September 2009 and December 2010.
The local shipbuilder failed to stick to the lead time, which made the buyers withdraw the orders in 2010.
The move put its financier IBBL in a sticky position, as it had to honour its performance bonds and refund guarantees worth $58.71 million to the buyers.
As is practice in shipbuilding contracts, the purchaser is required to pay instalments to the yard in advance of delivery of the vessel, and to secure those instalments, the shipyard is required to provide a 'refund guarantee' from a bank.
The bank undertakes the responsibility that if the purchaser ends the contract for good reason or if the builder for any reason fails to refund the advance instalments, it will reimburse the amount on the builder's behalf.
Performance bond, essentially, is a surety bond issued by a bank to guarantee satisfactory completion of a project by a contractor.
Ananda's total liabilities with IBBL stood at Tk 456.34 crore in June last year, and the central bank instructed the bank to make provisions against the sum, which IBBL duly acted on, according to Mohammad Abdul Mannan, its managing director.
The bank is now examining the pros and cons of renting out the ships, he added.
Established in 1983, Ananda Shipyard and Slipways Ltd is the first Bangladeshi shipbuilder to deliver a seagoing vessel to a foreign customer.