Sunday, October 10, 2010


MARAD moves at auction to hold Hawaii superferries itself

by Larry Geller

We reported on October 4 that the two former Hawaii Superferry vessels had been sold at auction for $25 million each, though the report could not be immediately verified. Dick Mayer points to an article indicating that the purchaser was MARAD (the U.S. Maritime Administration) itself.

It appears that no one bid the $150 million the government was looking for, so they kept it themselves. A recent article described MARAD’s intent:

A regular reader of this column sent me the DOT NOTICE OF PUBLIC AUCTION links for the sale of the vessels ALAKAI and HUAKAI and then added simply via E-mail, You can get them for a penny above what is owed. Before you start rifling through the sofa cushions for spare change, just know that Marad’s David Matsuda is on record as pledging to protect the government’s interests in the matter by matching any bid that does not equal the full amount owed. A Marad PAO confirmed that metric on Monday.  [Maritime Professional, Shopping at DOT: What’s in Your Wallet?, 9/29/2010]

Apparently MARAD did exactly that, from which we learn that there were no bids higher than the $25 million each, or MARAD would have matched the higher amount, of course. MARAD could not pre-determine the selling price since the auction was held not by them but by the bankruptcy court.

MARAD’s interest in the vessels was $140-180 million (see Brad Parsons’ analysis, What are the Hawaii Superferries Worth? (8/22/210). They have now spent another $50 million on top of their earlier loan and own the vessels outright.

The failure of the auction to produce anything near MARAD’s expected sale price lowers the worth of the two ships. Given that MARAD announced it would match any bid that did not bring in what they were owed, perhaps bidders who might have offered more than the $25 million each simply sat on their paddles—they had been warned that their bid would not succeed. Nevertheless, the sale price must have some downward influence on the valuation of the ships.

Could Hawaii now approach MARAD and buy the ships at a bargain price for service in a new Superferry scheme? Perhaps they could, but that does not change the economics of operating the fuel-hungry vessels in Hawaiian waters.


This $25 million for each vessel is on top of what MARAD already was owed and had in the vessels, about $150 million including interest. For some other bidder to have gotten the vessels, they would have had to bid at least $150 million to pay off the lien to MARAD. No doubt there WAS another bidder for more than $150 million or else MARAD would not have had to bid another $25 million for each vessel on top of what they already had in it.

MARAD ended up paying top dollar for these two vessels, almost $100 million for each. There is no way Hawaii could approach MARAD with an offer of $100 million for each vessel. Hawaii could though offer to sell some barges and ramps to MARAD or DOD for use with the two vessels in transport of Stryker Brigades in training between Oahu and the Big Island. That very well could happen...after an EIS is done.

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