Bender Shipbuilding client prevails in effort to collect on $5 million letter of credit

Bender Shipbuilding & Repair Co.'s motion to prevent a client from collecting on a $5 million letter of credit was denied by U.S. bankruptcy judge Margaret Mahoney, a blow that could be "devastating" to the Mobile shipyard.
Seacor Marine LLC of Houma, La., a Bender client, will be allowed to collect on the letter of credit, which was issued by Regions Bank, according to the ruling filed Monday in U.S. Bankruptcy Court. Seacor had required the letter of credit to "secure the well and true performance" of a
$154.7 million contract to build six offshore supply vessels, according to court documents.
Neither Bender nor its attorney, Irvin Grodsky, could be reached for comment Monday afternoon. Seacor and Regions declined comment.
The Seacor vessels are finished, and Bender maintains in court documents that Seacor has refused to pay what it owes for one of them. That vessel, damaged by a fire last spring, has been "repaired and fully and finally completed" Bender asserts.
But it is not the status of the vessels that has Bender in jeopardy regarding its contract with Seacor.
Seacor contends that a Chapter 7 bankruptcy petition filed by other Bender clients earlier this month puts the Mobile shipbuilder in violation.
Chapter 7 bankruptcy calls for liquidation of a company's assets to pay its debts.
A group of creditors, led by GulfMark Offshore Inc., is trying to force Bender into an involuntary Chapter 7 proceeding, claiming that Bender owes them more than $44.6 million, primarily stemming from a contract for three offshore supply vessels that Bender was unable to deliver.
Bender has challenged the petition, saying that at least two of the creditors involved do not meet a legal standard that requires uncontested debt.
In asking the court to block Seacor's demand for payment, Bender Shipbuilding President Tom Bender told the court that being obligated to Regions for $5 million immediately, as the company is trying to reorganize outside of court, would be "devastating."
At last count, the shipyard had fewer than 400 workers and was working on a handful of repair jobs after major client Overseas Shipholding Group Inc. pulled about $500 million worth of work in March, citing delivery delays.