Cancellation of agreement with Mitsubishi Corporation
19 September 2013
Reference is made to the announcement of Jinhui Shipping and Transportation Limited (the "Company") dated 14 December 2007 (the "Announcement"). The Announcement stated
that Jinqing Marine Inc. ("Jinqing"), a wholly-owned subsidiary of the Company, had entered into a contract (the "Contract") with Mitsubishi Corporation (the "Vendor" or "Mitsubishi") on
14 December 2007 for the acquisition of a deadweight 58,100 metric tons type bulk carrier (the "Vessel") at a purchase price of JPY4,500,000,000.
According to the Contract, Mitsubishi shall always remain responsible for the performance of the Contract. As of the date of this announcement, it is the Company’s firm position that Mitsubishi has failed to procure the Builder to construct the Vessel in compliance with the contractual terms and specifications within the contractual time frame of the Contract. Furthermore, the Company considers that Mitsubishi has failed to demonstrate that the Vessel has been built in accordance with the Contract and the specifications and has failed to procure the Builder to facilitate adequate inspections of the Vessel during its construction, which Jinqing has the right to request for and attend to in accordance with the Contract, despite repeated requests from Jinqing.
In particular, despite repeated requests from Jinqing, Mitsubis hi has ignored and further failed to procure the Builder to conduct sea trials as required by the Contract, yet has, notwithstanding, declared the Vessel as ready for delivery.
Accordingly, on 10 September 2013, Jinqing asserted that it was exercising its right to cancel the Contract. In such circumstances, it is the Company’s position and belief that Mitsubishi is obliged under the Contract to refund to Jinqing, inter alia, pre-delivery installments of JPY2,250,000,000 (approximately US$23 million at the current exchange rate of US$1 = JPY98.18) made by Jinqing prior to delivery, along with the value of items supplied by Jinqing, together with interest at a rate of 4% per annum and damages within the time frame stipulated under the Contract. As at the date of this announcement, Mitsubishi has failed to refund any sums to Jinqing or the Company and has disputed the obligation to do so.
Jinqing will engage all legal means to secure the Company’s and Jinqing’s rights and benefits under the Contract and pursue Mitsubishi to refund all sums to Jinqing or the Company accordingly. The Directors believe that the financial position and operations of the Group will not be adversely affected by the cancellation of the Contract. Prior to the cancellation of the Contract, the carrying amount of the Vessel under construction recorded in the financial statements of Jinqing was approximately US$17.3 million, being the prevailing direct costs of approximately US$26 million capitalized, net of an impairment loss of approximately US$8.7 million. The Company will make appropriate adjustments to its consolidated financial statements to reflect the cancellation of the Contract.
Further announcement(s) will be made by the Company as and when appropriate in respect of further developments. The Group’s principal activities include international ship chartering and ship owning. The Group currently owns thirty eight vessels which include two modern Post-Panamaxes, two modern Panamaxes, thirty two modern grabs fitted Supramaxes, one Handymax and one Handysize.
By Order of the Board
Ng Kam Wah Thomas
Managing Director
19 September 2013
Jinhui Shipping and Transportation Limited