Hawai'i-bound ship's builder seeks protection
By Kelly Yamanouchi
Advertiser Staff Writer
Norwegian Cruise Line's effort to bring a new U.S.-flagged ship to Hawai'i for interisland cruises suffered another setback yesterday when the German company building the Pride of America filed for receivership.
Lloyd Werft's shipyard in Germany sought protection from creditors after a storm last month left the 2,156-passenger Pride of America listing and partially submerged, the company said.
Norwegian, owner of Pride of America, is hopeful the shipyard's reorganization will not further delay completion of the ship, said Robert Kritzman, senior vice president for NCL America, Norwegian's company for U.S.-flagged operations.
"We don't know if this will delay things," Kritzman said.
The problems eventually could slow hiring for the cruise ships, and the setback leaves more uncertainty for Norwegian employees and businesses in Hawai'i anticipating the growth in cruise traffic.
It has been a history of bad luck and controversy for Pride of America, which started out as the first cruise ship to be built in the United States in more than 40 years. But the project was halted after the bankruptcy of American Classic Voyages. The ship was sold as an unfinished hull to Norwegian in 2002, then it partially sank last month in the shipyard.
"We need a Hawaiian blessing here," said Jennifer Goto Sabas, chief of staff for Sen. Dan Inouye, D-Hawai'i, who helped to secure the federal exemption for Norwegian's U.S.-flagged cruises.
Shipbuilding "is a tough business," she added.
Receivership is similar to Chapter 11 in the United States and allows companies to restructure under bankruptcy protection, Kritzman said.
Norwegian will discuss the completion of the Pride of America with shipyard management.
Kritzman said court-appointed receiver Wolfgang van Betteray has indicated he intends to continue operations of the shipyard and complete the ship.
After the storm disrupted progress on the Pride of America, Norwegian was not obligated to continue paying installments on the $350 million ship.
Norwegian was scheduled to pay about 37 million euro, or close to $47 million, due 150 days prior to delivery of the ship, dictated by progress in its construction, Kritzman said. But because Lloyd Werft could not certify progress after the storm, Norwegian did not make the payment.
Lloyd Werft said the ship could be refloated by the end of the week.
"At the moment, we are continuing with the salvage of this vessel," said Lloyd Werft managing director Werner Luekean.
The Pride of America originally was scheduled to begin cruising the Hawaiian Islands in July. Shortly after the ship's sinking, Norwegian said it would replace the Pride of America with the Pride of Aloha.
Norwegian hoped Pride of America would be added to its Hawaiian fleet by October, but the sinking could delay that until later in the year or next year.
Meanwhile, employees Norwegian originally hired for the Pride of America are waiting for news of the company's plans.
The company has said it plans to hire 3,000 U.S. employees, most from Hawai'i, for a total of three U.S.-flagged ships that it will operate in Hawai'i by 2007.
About 1,100 have been hired so far, and Norwegian continues to hire mainly for the first ship, Kritzman said.
"At some point when we know what the date will be for the second ship, we may or may not have to make a decision to slow down the hiring," Kritzman said.
The Hawai'i businesses partnering with Norwegian Cruise Line to offer tours, hotel rooms and services to the cruise ships and passengers are also left with uncertainty about the cruise line's plans.
"We are postponing an expansion of our operation," said Chris Resich, president of destination management firm Mary Charles & Associates, a Norwegian vendor. "We are all waiting for word on when the Pride of America will arrive."
The Pride of America was first conceived as one of two new U.S.-built cruise ships to be built for interisland cruises by American Classic, which had a federal loan guarantee for the construction of the ships.
American Classic filed for bankruptcy protection and shut down in 2001 after the Sept. 11 attacks, halting work on the two ships under construction in Mississippi. The cruise line's failure cost taxpayers $330 million, according to a federal audit.
Norwegian bought parts of the ships and towed a hull to the Lloyd Werft shipyard for completion. Norwegian then secured a federal exemption allowing it to use the vessel for interisland cruises in Hawai'i without visiting a foreign port. Federal law requires non-U.S. ships to include a foreign port when cruising among U.S. ports.
On Jan. 14, just months before the Pride of America's scheduled completion, the ship took on water during a heavy storm in Germany and listed 15 degrees. The partially-submerged ship came to rest on the bottom of the shipyard.
Norwegian was originally predicting the ship could be refloated in a few days to assess the damage, but more than three weeks later, the job has not yet been completed. Bad weather has slowed the process, Kritzman said.
It is unclear how badly the vessel has been damaged and how long it will take to repair. The largest expense is expected to be machinery and electrical equipment in the submerged lower decks.
"We remain hopeful that things will work out," said Goto Sabas, Inouye's chief of staff. "They clearly know that they need to deliver the vessel."
Once the ship is completed, Goto Sabas said, "We will lend a hand to do a Hawaiian blessing. Don't you think they need a blessing?"
Reach Kelly Yamanouchi at 535-2470, or at kyamanouchi@honoluluadvertiser.com.
