Cosco's big foreign client to delay payments?

Cosco susceptible for credit risk as other customers may also negotiate for more back-ended payment schedules.

Here's from OCBC Investment Research:

According to Sevan Drilling, the payment terms of Sevan Drilling Rig 4 contracted with COSCO Shipyard has been changed to a more back- ended schedule, i.e. 5% on contract execution in May 2011, 5% around Mar 2012, and the balance of 90% on delivery in 2Q12.

The original schedule was 5% on contract execution, 15% prior to steel cutting and balance 80% on delivery. (We checked with COSCO yesterday, but the group was unable to confirm this.)

Similarly, other customers may also negotiate for more back-ended payment schedules. This would mean that COSCO’s credit risk (and possibility fx/cashflow risk) may be higher than expected.