Gulf Island Fabrication announced on Thursday that its subsidiary Gulf Island Shipyards has reached a settlement in its legal dispute with American offshore vessel operator Hornbeck Offshore Services over the building of two multi-purpose supply vessels (abbreviated as "MPSV").

The final two ships in the company's fifth offshore support vessel (OSV) newbuild program were built at Gulf Island Shipyards (GIS), which filed a lawsuit against Hornbeck Offshore in 2018 for what it claimed was the improper termination of two shipyard construction contracts.

The two contracts had been terminated, according to Hornbeck, "because of GIS's performance issues."

Gulf Island Fabrication released the following statement on Thursday to announce the settlement: "In connection with the resolution, the court dismissed the lawsuit at the request of the parties to the litigation."

Furthermore, a binding term sheet relating to the settlement of Gulf Island and GIS's obligations under the performance bonds and any indemnity agreements relating to such bonds was signed by the parties involved: Gulf Island, GIS, Fidelity & Deposit Company of Maryland ("FDC"), and Zurich American Insurance Company, the issuer of the performance bonds for the MPSV contracts.

In return, Gulf Island and Zurich will sign a note agreement, according to which Gulf Island would pay Zurich $20.0 million, plus interest at a 3.0% annual rate, starting on December 31, 2024. Zurich was given control of the MPSVs by Gulf Island and GIS.

Richard Heo, president and chief executive officer of Gulf Island, said, "We are happy to be putting this matter behind us and feel this resolution is in the best interest of all of our stakeholders.

"The resolution will end ongoing legal fees and vessel holding expenses as well as eliminate the doubt and risk of a potentially bad result present in any jury trial. We will be in a healthy financial position with enough liquidity to continue pursuing our strategic goals thanks to the agreement with Zurich for payments to be made over fifteen years. The resolution is important because it eliminates a major distraction, which, along with the conclusion of the wind-down of our shipyard operations, will allow us to concentrate our efforts on growing the company successfully.

Gulf Island and Hornbeck, Offshore Resolve, MPSV