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  • DaBreeze21 DaBreeze21 Mar 21, 2012 3:48 PM Flag

    Should be talking about this...from the 20-F

    On September 28, 2011, we entered into a transportation contract, which was subsequently amended on October 7, 2011, with a first class international company whereby we agreed to transport 400,000 tons of iron ore over a period of one year starting January 1, 2012, and into a barge sale contract with the same customer for a total of twelve 2,500 DWT newbuilding jumbo barges to be delivered before the end of 2011. Our counterparts, however, failed to execute their obligations in respect of the barge construction contract wherefrom we have reserved all our rights under the respective agreements.

    On January 11, 2012, one of our subsidiaries initiated an arbitration proceeding in London, England, related to the non-performance of a barge sale contract and river transportation agreement. Under such arbitration the Company expects to be compensated for the losses and expenses which resulted from the breach of both agreements. The final amount to be awarded, if any, is however uncertain. The income will be taken into account if, when and to the extent the arbitration proceeding is favorably settled.

    That's just lovely. Rio Tinto renigs on the entire agreement? Is there something else at play here? I would love to know more about this. Maybe it is because China is about to fall off a cliff...ahaha that probably won't happen. Command and Control!!!

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    • The cancelation of the barge sale is unfortunate. Arbitration will compensate for material losses, but the sale and contracted ore shipments would have been preferred. Using the judgement settled in December as a guide, I won't expect to hear about the arbitration until it's resolved, or at best when they know a judgement date.

      I think it's a lot more likely that the counterparty (I haven't caught first hand where it's identified as Rio Tinto, nevertheless) sees excess barge capacity on the river this year as opposed to decreased demand as the reason for the cancelation.

      Without direct guidance from ULTR, I can't predict how many barges from the shipyard will be held for their own account versus how many will be sold. We know that going forward barge CapEx will be at a lower rate while ULTR is making tanker barges for their own use. The arrangement for the fleet management and sale of 14+5 newbuilt barges and a used pushboat to a customer on another river system is in a favorable direction.

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