OCBC Investment Research said on Monday it has placed its rating on Vard Holdings under review, after the shipbuilder announced over the weekend that two contracts have been terminated.
Vard on Saturday said two affiliates of a customer, E.R. Offshore, have filed for insolvency at a local court in Germany.
Consequently, on March 13, it terminated two shipbuilding contracts for one platform supply vessel (PSV) per affiliate, the company said. Vard was first notified of the insolvency case on March 12. It has received a 10 per cent instalment for one of the vessels.
"The group does not expect to repay the prepayment received, and expects to be able to sell the vessels at a price that will cover the expected construction cost less the prepayment received," it said.
OCBC noted that one PSV was scheduled for delivery in the middle of 2016.
"At the same time, the German owner took over a contract for a sister vessel from Carlotta Offshore via a novation agreement with delivery meant for Q3 2015," it added.
The share price of Vard was unchanged as at 9.46am, at S$0.52.