5. ASSETS HELD FOR SALE

On July 13, 2012, we received notice from our customer, Bluewater Industries, requesting (i) a slowdown of work on ATP Oil & Gas (UK) Limited’s Cheviot project, and (ii) an amendment to the scheduled payment terms under the original contract. On August 16, 2012, we entered into a binding agreement with Bluewater, an engineering consulting firm engaged by ATP UK to oversee the fabrication of the Cheviot project, to amend and restate the original contract and suspend the project. Among other things, the agreement outlines the revised payment terms for the contracts receivable balance and the limitations on Bluewater’s ability to request an extended suspension of work. Specifically, Bluewater was required to pay $200,000 on or before the last day of each calendar month through February 28, 2013, with the remaining outstanding balance due on or before March 31, 2013. In addition, if Bluewater had fully paid the balance on or prior to March 31, 2013, Bluewater would have the option to extend the suspension of work on the Cheviot project to June 30, 2013, after which Bluewater will have had no further rights to request a suspension of work. If Bluewater failed to make timely payments pursuant to the revised payment plan, we had the right to terminate the Contract, and to retain title to any project deliverables. We also entered into a security agreement with Bluewater pursuant to which Bluewater granted us a security interest in certain of its equipment.

As of December 31, 2012, $56.8 million had been billed on the Cheviot project and the outstanding balance was approximately $31.3 million. We recorded a $14.5 million reserve on the balance as of December 31, 2012. All installments under the agreement were paid through February 28, 2013; however the remaining balance of $30.9 million was not paid on or before March 31, 2013, triggering a default by our customer. As of April 1, 2013, the agreement terminated and we initiated action to enforce our rights under the security agreement.

As of June 30, 2013, the carrying amount of assets and liabilities relating to the project was reclassified as held for sale in our consolidated balance sheet, resulting in a non-cash change in contract receivables, billings in excess of cost and estimated earnings on uncompleted contracts, and assets held for sale. There was no additional loss recorded in connection with the non-cash reclassification. As of December 31, 2013, management estimates that the fair value of these assets held for sale was $13.5 million. The fair value of assets held for sale represent Level 3 fair value measurements (as defined by GAAP), based primarily on the limited availability of market pricing information for either identical or similar items.

In addition, during 2013 we included $1.0 million in assets held for sale for the sale of an aircraft. We recorded a $0.3 million loss on the sale of the aircraft. The aircraft was delivered to the buyer in February 2014.