Yangzijiang Shipbuilding Holdings' shares dropped Monday morning following news of arbitration proceedings against three of the company's subsidiaries for alleged breach of contract.
Shares of the Singapore-listed shipbuilder were recently 3.2% lower at 2.42 Singapore dollars, after having slide as much as 8.0% to S$2.30 earlier--the lowest intraday level since Aug. 6.
Yangzijiang Shipbuilding said Saturday that the claims involve 10 contracts between the claimants and the three subsidiaries in November 2021 for the purchase of four vessels, and in December for the purchase of six vessels. The contracts were later terminated by the claimants in March and May of 2022, respectively, it said. The total value of the contracts is around US$900 million, the company added.
The claimants began arbitration proceedings regarding four vessels in June 2022 and six vessels in September 2022, alleging breach of contract, Yangzijiang Shipbuilding said.
The claims total roughly US$835 million, consisting of loss of bargain, loss of profits and payment refunds, the company said. Payments made by the claimants for the 10 contracts totaled US$3.32 million, the company added.
Yangzijiang Shipbuilding said it was told by its legal advisors that "there were no merits in the claims and the claimants' claims were highly improbable to succeed."
"Substantive progress in the arbitrations was only made during the course of this year," Yangzijiang Shipbuilding said.
With the first phase of arbitration hearings scheduled for November 2024, the subsidiaries are working with legal advisors, the company added.
Given that the subsidiaries have "reasonably good" prospects of success, Yangzijiang Shipbuilding said the "claims are not expected to have a material adverse impact" on its financial position for the fiscal year ending December.
Luis Hilado, analyst at Citi Research, said "the issue is likely to be an overhang on the stock and hence pose a short-term negative."
"We await further color from management," he said in a note.
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