Gulfport, Miss.-based oil rig and shipbuilder Friede Goldman Halter Inc. submitted its restructuring plan March 22 to the U.S. Bankruptcy Court for the Southern District of Mississippi in Biloxi.
FGH was driven to file for Chapter 11 on April 19, 2001 after cost overruns and construction delays for four complex deep-sea drilling rig construction projects proved too much for the company. The company resulted from the 1999 merger of Friede Goldman International and Halter Marine Group Inc.
FGH plans to rebuild around two operating divisions-Friede Goldman International's oil rig construction and repair unit, and Halter Inc.'s government and commercial steel ships construction business-which will exit Chapter 11 protection as independent companies. The company is, in effect, undoing the merger.
At the time of the merger, Friede, a designer and manufacturer of oil rigs, with additional expertise in naval architecture and marine engineering and Halter, a Gulfport, Miss.-based builder of commercial oceangoing vessels, seemed to be perfect complements.
But the perceived synergies of a deal never materialized. The company has not reported a profit since completing its merger, largely because it was overcome by construction delays and rocketing costs linked to two price-fixed contracts, negotiated by Friede Goldman in 1998, to build four deep-sea oil drilling platforms. For the fiscal year 2000, the first full year following the merger, FGH reported a loss of $102.5 million.
Two of the platforms, the Bingo 9000 rigs, were to be built for Ocean Rig ASA. In January 2000 FGH was embroiled in a dispute over the reasons for delays and liability for cost overruns. FGH said the delays came when it had to revamp Ocean Rig's design and that Ocean Rig's subcontractors missed deadlines for equipment and supply shipments. Ocean Rig claimed no fault for the delays and would not pay for overruns.
The two companies appeared to have settled their differences in late January, but by December felt the need to draw up a cooperation agreement to complete the project. Construction on the Bingo rigs was halted in March 2001. New legal battles ensued, new agreements were forged, and it was thought that work on the Bingo rigs would resume by mid-March. It would be underwritten by Ocean Rig, with the agreement that counterclaims Ocean Rig and FGH launched against each other be dropped.
The story with Petrodrill's Amethyst platforms is as complex as their construction. The Amethyst rigs' cost was partially underwritten by a surety company that somewhat padded the blow from excess costs, but work on their construction was still costly relative to other projects. FGH petitioned the bankruptcy court to reject the Petrodrill contracts and won, freeing the rig builder to negotiate favorable terms for completion or partial-completion delivery of the Amethyst platforms.
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