A new chapter for Harvey Gulf: Chapter 11
Industry insiders watched with interest last week as Harvey Gulf International Marine Inc. filed for Chapter 11 bankruptcy protection (see Kirk Moore’s March 9 WorkBoat.com article). They have been watching the New Orleans-based offshore service vessel operator with intense interest the last few years as it pursued an ambitious and — to some eyes — risky newbuilding program in the face of an extended industry downturn.
Not only was Harvey Gulf building big, beautiful, expensive OSVs like the Harvey Sub-Sea and Harvey Deep-Sea, it built the Gulf of Mexico’s first LNG-powered OSV, the Harvey Energy — overcoming many expensive technological hurdles in the process. And, due to the paucity of LNG bunkering facilities in the U.S. Gulf, the company built an LNG bunkering facility at its Port Fourchon, La., dock.
But decisions have consequences, and the cash-flow shortage Harvey Gulf now faces could have been — and was — foreseen. The corporate strategy may well prove wise in the long run, and Chapter 11 is, after all, merely a negotiating strategy, albeit a shillelagh of one. In this case, Harvey Gulf is using adverse market conditions to renegotiate its contracts.
Do the creditors get to second-guess the company’s decision to build these vessels in these perilous times? No. Do the creditors get to enforce the terms of their original contracts? No. But being sophisticated industry players, they knew that Chapter 11, the bête noir of lenders and creditors, was certainly a possibility.