Keppel O&M entity gets interim injunction to forbid payment on US$126.6m letter of credit
Tay Peck Gek
AN ENTITY under Keppel Offshore and Marine (Keppel O&M) was on Wednesday (Sep 14) granted a temporary court order to prohibit payment on a US$126.6 million standby letter of credit to a customer amid a claim involving a rig contract.
Mainboard-listed Keppel Corporation provided the update in a regulatory filing on Wednesday on its earlier application to the Singapore court for the injunction, and said it would provide further updates when there are material developments in the legal proceedings.
Keppel had disclosed that there were 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 had 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.
Shares of Keppel were 2.3 per cent lower at S$7.35 when market closed on Wednesday.
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