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OFFSHORE marine group Otto Marine said on Thursday it has been advised by its lawyers that the claim against its wholly owned subsidiary, Otto Ventures Pte Ltd, "is vexatious" and cannot be justified.
In a filing on Singapore Exchange, Otto Marine said the likelihood that this claim - that Otto Ventures allegedly breached an agreement by refusing to help secure required financing for two offshore vessels - would succeed is low.
Last September, Otto Ventures entered into a term sheet with two other parties pertaining to the acquisition and operation of two offshore vessels.
The two parties are a holding company and its wholly owned subsidiary.
They have started arbitration proceedings against Otto Ventures, where they are claiming losses of about US$8.88 million.
The group said Otto Ventures had loaned US$650,000 to the holding company last September.
The condition was that the loan is to be paid in December should the vessels not be transferred to a joint-venture (JV) company, which was to be set up.
To secure the loan, each of the shareholders and directors of the holding company gave a joint and several personal guarantees to Otto Ventures, as well as charged their shares in the holding company to Otto Ventures.
The loan has not been repaid, said the group.
Subsequently, Otto Ventures told the claimants of its intentions to terminate the term sheet.
This, as Otto Ventures said the claimants failed to ensure the timely delivery of the vessels and the JV company's failure to obtain financing.
The first procedural meeting of the arbitration was held on May 4, to decide and agree on the timelines for all documents to be submitted.
Otto Marine said it "has more than an even chance of successfully defending the arbitration".
It added that it plans to "vigorously defend" itself against the claim and is currently seeking further legal advice on the counter-claims that it may file in the arbitration and the various causes of action it may have against the claimants and the guarantors.