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Jiangsu Eastern yard defends itself against blacklisting by Chinese court

Jiangsu Eastern yard defends itself against blacklisting by Chinese court
Jiangsu Eastern Heavy Industry (JEHI) has been blacklisted by the Supreme People’s Court of China for refusing to repay its debt obligations, but the Chinese yard has defended its position.

JEHI, a subsidiary of Singapore-listed JES International, is obliged to repay around RMB15m ($2.4m) from five separate lawsuits filed by equipment suppliers between January to April this year, but the yard failed to repay any of them, according to a statement from the court dated 17 July.

The court’s so-called ‘list of dishonest companies’ that now includes JEHI in this case refers to companies that have the ability to repay but refused to perform their debt obligations.

A JES spokesperson said that the debts refer to warranty funds held by JEHI when the yard purchased shipbuilding equipment and marine equipment from equipment suppliers.

“Normally 5-10% of the contract price shall be held with JEHI as quality warranties and this is to be paid after warranty periods. There were disputes on releasing the warranty funds between JEHI and some equipment suppliers,” the spokesperson told Seatrade Global.

JEHI believes that the suppliers did not fulfill their obligations while the suppliers claim that they have done their jobs, the spokesperson explained.

“According to the court’s award, suppliers should complete all defects and JEHI should return them the 5-10% (warranty fund). The suppliers asked the court to enforce JEHI to repay the warranty funds, but since the suppliers have not completed all defects, JEHI refused to release the warranty funds,” the spokesperson said.

“JEHI can also ask the court to enforce the suppliers to complete all defects. This cannot be regarded as pure debt obligations,” the spokesperson added.

The blacklisting issue has no influence on JEHI’s daily operations, and two banks have recently issued new refund guarantees for the yard’s new projects this month, the spokesperson pointed out.

Earlier this month, JES International has also defended itself against an allegation by its lender Lyceum Partners on a non-payment of maintenance fee under a credit facility agreement.

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