ACV inks deal: Work on 2 new ships continues

NEW YORK -- U.S.-flag operator American Classic Voyages reached an agreement with Northrup Gruman Corp., parent company of Mississippi-based Ingalls Shipbuilding, that will allow work to continue on two 1,900-passenger ships Ingalls is building for ACV.

The agreement was endorsed by the U.S. Maritime Administration with the support of U.S. Secretary of Transportation Norman Mineta, according to a joint statement issued by Northrup and ACV.

Under the terms of the agreement, the vessels' delivery dates were extended by 12 months to Feb. 1, 2004 and Feb. 1, 2005.

Also, the project's price tag was increased by $19 million to about $459 million to cover "costs of the interior finishing package," according to the statement.

The design of the ships is "virtually complete," according to the statement, and work on the first vessel is one-third complete. Furthermore, ACV has committed $42 million and Northrup Gruman $44 million to acquire through 2005 a new issue of stock in ACV's Project America subsidiary."

The equity will be used to "help offset the price increase and associated costs for the delivery extensions" and provide "additional funding" for the ships.

The agreement does not increase the $1.1 billion loan guarantee provided by the Maritime Administration. Last month, ACV and Northrup entered discussions following criticism from Sen. John McCain (R.-Ariz.), who complained that the over-budget and behind-schedule project might collapse, leaving U.S. taxpayers holding the bag.

Project America is being funded in part through federal loan guarantees provided under the Title IX program.

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