Is AMS using Ezion as a scapegoat?

The middleman could be trying to save its position.

Bareboat-charterer AMS is suing Ezion in what could potentially be viewed as an attempt to move the spotlight away from the Maersk Oil middleman.

According to a report by RHB Group, several inconsistencies in the reported legal filing jumped out.

Ezion has been sued by Atlantic Marine Services BV (AMS), through whom it bareboat-charters liftboats to Maersk Oil. AMS claims: i) Ezion conspired to induce Maersk Oil to breach charter agreements, ii) that Ezion created the impression that AMS was in financial trouble, and iii) that “it agreed to pay inflated charter rates to Ezion… to secure bigger loans”.

Maersk Oil, who is not a party to this lawsuit, said that it has terminated its contract with AMS “for its failure to meet contractual obligations”.

However, RHB analysts note from Ezion’s 1Q15 results that the units chartered to Maersk Oil are still operating. This, to RHB, may seem that the end client could be dissatisfied with AMS’ operations, but not with Ezion’s liftboat assets.

“We understand that Maersk Oil has been paying Ezion directly for the use of its assets. We highlight that “normal” charter rates for liftboats are sufficient to secure bank loans up to 70-80% of the asset’s value, which refutes the third point above,” says RHB.

It was Maersk Oil that first approached Ezion on this issue of an underperforming operato, which strongly argues against the first point.

“We have no additional information on the financial position of AMS. We think it would be irrational to create such false impressions and unnecessarily imperil the status of the charters, which weakens the second point,” RHB adds.

Analysts also remember the unfounded lawsuit against Yangzijiang Shipbuilding’s chairman last year, which resulted in a mispricing amid the tumbling share price.