Australian satellite company linked to tycoon Ching Chiat Kwong sues banks over withdrawn loans

AN AUSTRALIAN satellite communications provider linked to Singaporean businessman Ching Chiat Kwong is suing five financial institutions in Australia for withdrawing critical funding for the business.

The Business Times (BT) understands that Ching, who runs property developer Oxley , invested north of S$70 million in his personal capacity into NewSat Group, one of the plaintiffs. NewSat has since been placed under liquidation amid funding difficulties.

Ching is not a party in the suit. However, BT understands from sources familiar with the case that Ching has committed between S$7 million and S$8 million of the costs of the lawsuit, and that he is prepared to spend between S$15 million and S$20 million to see the case through.

As part of the suit, the plaintiffs are claiming damages and costs for breach of contract and compensation under Section 12GF of the Australian Securities and Investments Commission Act and Section 236 of the Australian Consumer Law. A key hearing in which the Australian court will give directions to parties will take place on Jul 7.

NewSat was a former Australian Securities Exchange-listed company before it went into receivership and went into liquidation in 2015.

Court documents show that the defendant lenders include Societe Generale, Standard Chartered and Credit Suisse, which has since been acquired by UBS and Export-Import Bank of the United States (Exim Bank).

The suit also names Compagnie Francaise d’Assurance pour le Commerce Exterieur (Coface), which acted as an official export credit insurance agency, as a fifth defendant.

The suit alleges that the lenders failed to honour their loan commitments, which led the company to be unable to pay Lockheed Martin and Arianespace.

Both companies were engaged to construct and launch the Jabiru-1 Ka-band satellite respectively, which was expected to serve South-east Asia, the Middle East and North Africa.

Based on court documents, the loan commitments amounted to about US$415.1 million, of which Exim Bank provided US$300.5 million in an export financing credit facility in July 2013. The company also had equity investments of more than US$200 million.

However, the company took on US$6 million in subordinated debt in March 2014 to fund a cash flow shortfall as a result of its teleport business recording losses in the half-year ended Dec 31, 2013.

The lenders then issued notices of default that the plaintiffs allege were triggered by the new debt. The plaintiffs allege that this took place even though the lenders had agreed to the additional debt.

Furthermore, a consultant was hired by three of NewSat’s directors in May 2014 to investigate allegations against NewSat chief executive Adrian Ballintine.

According to the plaintiffs, the consultant, Brendan Rudd, concluded that the allegations did not affect the viability of the Jabiru-1 project, and that the company was a “good company with good assets and good people”.

Still, he recommended that Ballintine be removed from his position.

The plaintiffs allege that after the findings, the lenders withheld funding and asked that NewSat enter into another waiver agreement in February 2015.

The new waiver included conditions such as a requirement for the company to raise more capital and to provide more details for Ballintine’s potential reappointment as chief strategy officer.

Despite Exim Bank’s alleged agreement with the terms in principle, the lenders ultimately did not execute the waiver as Coface allegedly did not agree that the lenders should grant it.

As the company was no longer able to pay Lockheed Martin and Arianespace for their services, both companies ceased work.

In February 2020, Ballintine pleaded guilty to authorising and making false or misleading documents after he funnelled A$357,000 (S$328,354) in a private yacht business he owned. He was later fined A$15,000 and disqualified from managing a company for five years.