NanTong Pacific Offshore Engineering's Crossroads of Life and Death

An announcement from CIMC Enric seems to suggest Nantong Pacific Ocean Engineering's miraculous rebirth, but the situation may not be so simple. Whether it will successfully reorganize or ultimately declare bankruptcy, for Pacific Ocean Engineering, CIMC Enric's participation in the reorganization is only the first step to success; the creditor's meeting vote and court approval are the keys to successful reorganization. The reorganization of Nantong Pacific Ocean Engineering has reached a crossroads of life and death.

Production has completely ceased, and the future remains uncertain.

According to International Shipbuilding Network reporters, Nantong Pacific Ocean Engineering Co., Ltd.'s administrator recently sent a "Second Creditor Meeting Notice for the Nantong Pacific Ocean Engineering Co., Ltd. Reorganization Case" to all creditors of the company, stating that a second creditor meeting will be held in Qidong in the near future. The main item on the agenda is to approve Pacific Ocean Engineering's draft reorganization plan.

It is understood that since entering bankruptcy and reorganization procedures, Nantong Pacific Ocean Engineering has, amidst difficulties, retained and successively delivered the Yamal LNG pipe rack module, 2 27,500 cubic meter LNG carriers 、3 offshore engineering modules, and 2 38,000 cubic meter LEG carriers and other important projects.

It is reported that after delivering its second 38,000m³ LEG carrier on June 17 this year, Pacific Ocean Engineering has faced a depletion of effective orders and is unable to smoothly receive new orders. The company has now completely ceased production, with more than 200 of its 600 employees on leave at home. Whether the abandoned ships can be continued, and whether the offshore engineering modules for prospective clients will be ordered, all depend on the successful reorganization of Pacific Ocean Engineering. It can be said that the future of Pacific Ocean Engineering remains uncertain, especially subject to the votes of the majority of creditors at the second creditor meeting.

CIMC Enric's participation in the reorganization is only the first step to success.

According to bankruptcy law professionals, the prerequisite for the successful reorganization of Pacific Ocean Engineering is that a reorganization investor is willing to participate in this reorganization. If there is no reorganization investor, Pacific Ocean Engineering will be unable to submit a feasible draft reorganization plan and will inevitably face liquidation. Currently, the overall offshore engineering industry is sluggish, the industry is in a downturn, and it is a capital-intensive industry, which poses a challenge to the strength of reorganization investors. In the entire industry, there are very few reorganization investors who have both the intention and the ability.

Relevant personnel from the administrator introduced that in order to maximize the asset operating value and long-term development of Pacific Ocean Engineering, and to maximize the protection of creditor interests, the administrator, in accordance with the principles of fairness, openness, and impartiality, publicly recruited capable reorganization investors nationwide.

The administrator successively published "Announcement (I) on the Recruitment of Reorganization Investors" and "Announcement (II) on the Recruitment of Reorganization Investors" in Nantong Daily, Qidong Daily and other print media, as well as on the national enterprise bankruptcy and reorganization case information platform and the International Shipbuilding Network and other shipbuilding industry online platforms on December 8, 2016, and March 24, 2017, respectively, recruiting reorganization investors to participate in the reorganization of Pacific Ocean Engineering. However, during the announcement recruitment period, no prospective investors signed up, and not even a single prospective investor inquired about the recruitment situation. The market response was extremely bleak. If no reorganization investor appears, Pacific Ocean Engineering will have to be liquidated.

It should be noted that if Pacific Ocean Engineering goes into bankruptcy liquidation, all of its assets will be disposed of and realized through judicial auction, and the relevant qualifications attached to Pacific Ocean Engineering will be completely lost. At that time, it will be difficult for investors to take over Pacific Ocean Engineering as a whole, and the assets will face piecemeal realization, with their value greatly depreciating during the disposal process. Moreover, during the realization process, costs such as auction fees, taxes, and demolition costs will also be incurred. Edward Heavy Industry Co., Ltd., Qidong, Haowei Shipbuilding Heavy Industry Co., Ltd., Nantong Huigang Shipbuilding Co., Ltd., and Nantong Mingde Heavy Industry Co., Ltd., and other bankrupt shipbuilding companies, when their assets were auctioned as a whole or in part, were repeatedly unsold before finally being sold at prices far below their appraised value.