Published by The Maritime Executive

Published by The Maritime Executive

Published by The Maritime Executive

Published by The Maritime Executive

Published Mar 9, 2022 5:42 PM by The Maritime Executive

The shipyard near the former U.S. naval base at Subic Bay in the Philippines, which had been converted into a commercial shipyard in the 1990s, is set to be sold to U.S. equity investment firm Cerberus Management Capital with Agila Naval becoming operators of the sprawling facility. The newly appointed chairman and administrator of the Subic Bay Metropolitan Authority announced the agreement during a ceremony taking office on Monday saying that Cerberus was given the go-ahead to assume the operation on February 25. 

Philippine's officials had been leading the negotiations with competing shipyards and investors. The commercial shipyard operated by South Korea’s Hanjin Heavy Industries ceased operations in 2019 after defaulting on a total of $1.3 billion in outstanding loans, including $400 million due to Philippine banks and $900 million in loans from South Korean lenders. The shipyard, which at its peak had employed about 30,000 workers, went into court receivership.

In 2019, at least eight foreign companies reported expressed interest in the shipyard to officials in the Philippines. Among the rumored bidders were two Chinese firms, but the Philippines reportedly wanted to keep the yard out of Chinese control. Australian shipyard operator Austal had reportedly emerged as the leading bidder, but fell out and is no longer a tenant at the facility. By the summer of 2021, the Subic Bay Metropolitan Authority was reporting that a U.S. firm had been selected.

The Philippine Navy reported that it signed a terms sheet in 2021 for the North Yard, which covers about 250 acres of the site that is in total more than 700 acres. The Subic Bay Metropolitan Authority reports the Philippine Navy will start ramping up its operations with included docks and general ship operations as well as shore support operations.

Media reports from the Philippines indicate that Cerberus has agreed to pay approximately $300 million which will be used to settle the debts of the five Philippine banks. Hanjin will hand over the 50-year lease of the facility to Cerberus. The South Yard will be restarted as a commercial shipyard with Agila seeking tenants. They expect to lease portions of the facility to international tenants. During the first phase of resuming operations, they expect as many as 3,000 jobs will be created at the facility. Other sections of the former U.S. Naval base were turned into an economic development zone operated by the Philippines.

Working with the U.S. International Development Finance Corporation, Agila has already issued a scope of work assessment calling for upgrading buildings at the site to modern operational and safety standards. This includes providing adequate facilities and procedures to manage ship waste and ballast water and response capabilities for potential spills of hazardous materials. They are also planning a broad range of infrastructure improvements at the yard facilities.

Founded in 1992, Cerberus, which is headquartered in New York, is a global leader in alternative investing with approximately $55 billion in assets. The company’s investments include credit, private equity, and real estate.

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