Keppel O&M entity applies for court injunction to prohibit payment on US$126.6m letter of credit

AN ENTITY under Keppel Offshore and Marine (Keppel O&M) on Monday (Sep 12) applied for an injunction from the Singapore court to prohibit payment on a US$126.6 million standby letter of credit, amid a customer claim involving a rig contract.

Back in Feb 2019, Keppel disclosed that there were customer potential claims arising from disputes over the validity of certain foreign exchange fluctuations and cost escalation contractual formulas in a rig contract entered by the Keppel O&M entity.

The entity, which is 75 per cent-owned by Keppel O&M, had provided the standby letter of credit in favour of the customer, for the purpose of repayment of the amounts received by the entity. The sums were calculated based on the contractual formula.

However, a “relevant” government authority decided that the contractual formulas were invalid, following which the customer on Monday sought to call on the standby letter of credit, Keppel said in a Tuesday bourse filing.

Keppel considers that the decision is still subject to possible modification and the call was “premature”. Besides obtaining the injunction, the Keppel O&M entity has also filed legal proceedings in the local court to challenge the decision of the relevant authority.

Keppel has previously made a provision in its accounts for the full amount payable under the standby letter of credit, and considers that no further provision is required. It therefore does not consider there to be any material impact on its overall financial performance.

SEE ALSO

Keppel Land to acquire JV partner’s 4% stake in China golf resort owner

Shares of Keppel ended Tuesday at S$7.52, up 0.8 per cent or S$0.06.