NZECO Bond Guarantee assists boat builder meet buyer bonding requirements

Page updated 15 Aug 2011

Source:  Q-West Boat Builders

The Challenge

In 2010, Wanganui-based Q-West Boat Builders won a contract to construct a 16.34 metre 'Harbour Cleaning Catamaran' for the NSW Maritime Authority. As part of the contract requirements, Q-West was required to provide a 10% performance bond during the manufacturing period and a 10% retention bond on completion of the build.[1]

However, Q-West was at lending limits with their bank due to demands for FX and working capital facilities related to the NSW contract and other domestic boat building contracts they were performing at the time.

The Process

Q-West Managing Director, Myles Fothergill, contacted the NZECO seeking its support to underwrite the bonds in order to enable its bank to issue them. After initial discussions with the NZECO, Myles and his banker submitted an application for a NZECO contract bond guarantee.

The NZECO underwriters undertook a comprehensive assessment of Q-West and their ability to perform. The assessment involved understanding Q-West's historical and forecasted financials, their technical and management abilities to perform this and other contracts, on-site visits, interviews with their bank, and a review of the contractual and bonding documentation.

The Solution

As a result of this appraisal, the NZECO offered its bond guarantee to Q-West bankers enabling them to issue one of two bonds required whilst maintaining headroom in Q-West other trade bank facilities to keep this and other contracts on target.

After 11 months' solid work by Q-West the vessel underwent sea trials and was delivered to the NSW Maritime on 23 May 2011. The buyers were extremely happy with the working vessel, commenting that the boat was "a true example of marine engineering brilliance".

"This contract has been hugely important to Q-West, because it gives our company a foothold in the tough Australian market" said Myles Fothergill. "We are extremely pleased with the support that the NZECO provided in helping us issue the bonds." The NSW contract has been added to Q-West’s impressive domestic and international customer list, built up over 17 years of operations. Customers include NZ Police, NSW Maritime, Whale Watch Kaikoura, Pine Harbour Ferries, and Real Journeys.

Carmen Moana, Manager of the NZECO, commented that "this is a great example of the role NZECO can play in assisting proven exporters access trade finance from their banks to grow NZ exports. The delivery of this contract with the support of the NZECO will potentially pave the way for more exports of working and pleasure boats by Q-West."