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The Austal-built littoral combat ship USS Montgomery sits pierside at Changi Naval Base, Singapore, July 6, 2019.
The Austal-built littoral combat ship USS Montgomery sits pierside at Changi Naval Base, Singapore, July 6, 2019. (U.S. Navy)

An Australian shipbuilder with strong ties to the Navy is favored to assume control of the Philippines’ Subic Bay shipyard, where it plans to build and service U.S. warships.

Austal, based in Western Australia, and U.S. private equity firm Cerberus Capital Management are in the running to take over the yard from Hanjin Shipping, a South Korean firm that went bankrupt in 2016. Subic Bay was for decades a key U.S. base before the Navy’s departure in 1992.

A pair of Chinese companies signaled interest in Subic Bay last year, but media reports suggest the Austal-Cerberus bid may be the strongest.

“It’s not going to be a U.S. naval base like it was, but it would be a US/Australian company doing business to support both the U.S. and Philippine navies as well as countries in the region,” Austal’s customer affairs and business development director, Lawrence Ryder, said said in a telephone interview June 8.

The Sydney Morning Herald in a May 8 article noted the company’s interest in Subic Bay and its hopes to build the first six of 18 offshore patrol boats for the Philippines, a project worth $950 million.

Austal’s partner in the prospective Subic deal, Cerberus, has $42 billion in assets, including two U.S. defense firms. CEO Stephen Feinberg was considered by President Donald Trump for a top job at the Office of the Director of National Intelligence, according to the New York Times in April.

Nikkei Asian Review reported in December that Hanjin defaulted on $1.3 billion in loans and that Austal’s offer is subject to negotiations with the 340-acre shipyard’s creditors. Before the yard’s collapse, Hanjin invested $2.3 billion in Subic, according to the newspaper.

Robert Empedrad, since March the head of the Philippine Maritime Industry Authority, told Nikkei in the same article that the Navy backs the Austal-Cerberus consortium and opposes any Chinese takeover. Empedrad at the time was a vice admiral and chief of the Philippine Navy.

“The U.S. and Australia are good friends of our country,” he said, according to the newspaper. “They are allies of our country. I have a very good relationship with the chief of the U.S. Navy and the chief of the Australian Navy.”

The U.S. Embassy in Manila did not respond to emailed questions about the move.

Ryder said Monday that he couldn’t comment on negotiations other than to say that the company is in discussions about expanding its capability in the region.

Austal is looking at options in the region to support the U.S. Navy and the ships that the company has built and delivered to the Navy, he said, adding that it hopes to set up a maintenance facility for ships of the U.S. Navy and Military Sealift Command. Austal also wants to establish a facility to build new vessels.

The harbor at Subic Bay was home to thousands of U.S. sailors and their families before the Navy left. It’s still a regular port call for U.S. warships and Marines who practice beach landings nearby in Zambales province.

Subic’s importance has grown in recent years amid Chinese efforts to build military facilities on artificial islands and claim sovereignty over territory to the west in the South China Sea.

Austal operates a shipyard in Australia and, under a special security agreement, in Mobile, Ala., where it builds littoral combat ships and expeditionary fast transport ships for the U.S. Navy.

The company already has an extensive operation on the fringes of the South China Sea to include shipyards in Vietnam and at Cebu, the Philippines, and a service center in Singapore, where the littoral combat ship USS Gabrielle Giffords is deployed.

“It’s a significant expansion,” Ryder said of the potential move into Subic. “We are really focused on that region. The Navy has focused there so it’s natural for us to align and support that.” Twitter: @SethRobson1

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