Taipei-Financially troubled Ching Fu Shipbuilding Co. is facing termination of a multibillion-dollar contract with Taiwan's Navy if the company fails to pay a surety of NT$7.9 billion (US$270.18 million) by Dec. 8 as demanded by the Ministry of National Defense, two of the company's lenders said Monday.
Ching Fu, which is currently under investigation for alleged fraud, has defaulted on a NT$20.5 billion loan from a consortium of nine lenders, according to First Commercial Bank, the primary lender. The loan, which was obtained allegedly by submitting falsified documents, was for the purpose of building a fleet of minesweepers for the ROC Navy.
Ray Dawn (???), chairman of First Commercial bank, and Lyu Jye-cherng (???), chairman of the Bank of Taiwan, told lawmakers on Monday the Ministry of National Defense has decided not to extend the payment deadline for Ching Fu.
The bank consortium will hold a meeting on Nov. 28 to decide whether to extend a default deadline. The two bankers said given Ching Fu's poor finances, it is highly unlikely the consortium will further extend the deadline.
In that case, the consortium will have to write off a loss of NT$12.5 billion, banking sources said.
The military also decided earlier that it would not extend its deadline more than 10 days after Nov. 28.
Under the terms of the NT$35.85 billion contract, the Ministry of National Defense (MND) will dissolve the contract if Ching Fu fails to make the surety payment by Dec. 8.
On Sunday the Coast Guard Administration (CGA) terminated its contract with the financially troubled shipbuilder and demanded NT$1.2 billion in compensation.
The CGA said the Kaohsiung-based shipbuilder failed to meet a Nov. 26 deadline for delivery of the 14th of 28 patrol boats, after missing several earlier deadlines. In May 2013, Ching Fu won a CGA tender to build 28 100-ton patrol boats and has completed and delivered 13 so far.
Ching Fu Chairman Chen Ching-nan (???) declined to answer reporters' questions about the issue on Monday while on his way to report at a police station in Kaohsiung, as he is required to do daily.
Chen was arrested in August and released on bail of NT$8 million in the case of a suspected loan fraud linked to the NT$35.85 billion contract with the Navy to build the six minesweepers.
Source: Focus Taiwan News Channel