WASHINGTON, March 21 (UPI) -- The U.S. Department of the Navy now supports Northrop Grumman Corp's spinoff of its shipbuilding business in Virginia and elsewhere.
According to a news release from the Department of Defense, the Navy finds Huntington Ingalls Industries Inc. responsible for the award of the amphibious transport dock ship LPD 26 and guided missile destroyer DDG 113.
Both contracts are under negotiation with Northrop Grumman.
Huntington Ingalls Industries Inc. is a new firm being created by the spinoff.
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"NGC has cooperated with the Navy in working through the complex issues related to its potential spin-off of its shipbuilding business to HII," said Sean Stackley, assistant secretary of the Navy for research, development and acquisition.
"Our support of the spinoff is based on a critical review of HII's proposed capital structure, current contract financials, required capital investment and proprietary forward-looking projections.
"Ultimately, with appropriate adjustments made by NGC as a result of the Navy's findings and captured within an agreement between NGC and the Navy, we have been able to resolve our concerns about the risk involved to this important segment of our shipbuilding industrial base."
The Defense Department said the Navy's concern with HII's credit rating has been offset by Northrop's agreement to relieve HII of first quarter 2011 debts, to provide a starting cash balance of $300 million and not to recoup retentions, performance incentives and economic price adjustment payments that the Navy might owe under current shipbuilding contracts with Northrop Grumman Ship Building from HII.
"The Navy evaluated the extent of considerations made by NGC as appropriately addressing the risk of this spin to Navy shipbuilding" said Stackley. "The Navy regards HII as a responsible contractor and is proceeding to finalize the negotiations with the intent to award the contracts for construction of LPD 26 and DDG 113 to HII."
