Emas Offshore, Perisai agree to settle dispute over US$43m put option

Emas Offshore had been in talks with Perisai, a joint venture partner, since October over the option contract. Under the proposed settlement, Emas will fork out US$20 million in cash over the next few months while deferring payment on another US$23 m
Emas Offshore had been in talks with Perisai, a joint venture partner, since October over the option contract. Under the proposed settlement, Emas will fork out US$20 million in cash over the next few months while deferring payment on another US$23 million for up to 15 years.PHOTO: EZRA HOLDINGS

Offshore marine contractor Emas Offshore has agreed to avoid a protracted legal dispute with collapsed Perisai Petroleum Teknologi by entering into an agreement to reach "full and final" settlement of disputes relating to a US$43 million (S$62 million) put option.

Emas - a subsidiary of Ezra Holdings - had been in talks with Perisai, a joint venture partner, since October to resolve the option contract, inked in December 2012.

The contract gave Perisai the right to exercise a put option to sell its 51 per cent stake in subsidiary SJR Marine to Emas for US$43 million. The put was originally exercisable on Nov 26.

SJR is a single-purpose company that owns marine vessel Enterprise 3. The vessel is not on contract. Emas already owns the other 49 per cent of SJR.

The proposed settlement, which will require Emas to fork out US$20 million in cash over the next few months while deferring payment on the other US$23 million for up to 15 years, "significantly reduces the cash upfront vis-a-vis what would have been under the previous terms of the put option", Emas said yesterday.

Completion of the proposed settlement agreement is conditional upon satisfaction of certain conditions within a certain timeframe, or "long stop period", of four months.

Either party can request that this period be extended by one month per request, subject to the other party's consent and a maximum extension limit of four months.

At the end of the long stop period, Emas will pay US$20 million in cash to Perisai for all of Perisai's shares in SJR Marine.

Emas will pay the remaining US$23 million in instalments, subject to an annual interest rate of 1 per cent that will accrue from the completion date.

The entire US$23 million will come due 15 years after the US$20 million is paid, or on the date when Emas' payment obligations to OCBC and other lenders have been fully settled, whichever is earlier.

Nine conditions must be satisfied within the long stop period before the first US$20 million will be paid by Emas to Perisai.

These are basically steps for each side to assure the other that it can carry out its side of the deal. For example, Emas must prove to Perisai it has obtained a US$20 million secured term loan facility from an existing bank lender to finance the purchase of the SJR Marine shares.

A version of this article appeared in the print edition of The Straits Times on December 24, 2016, with the headline 'Emas Offshore, Perisai agree to settle dispute over US$43m put option'. Print Edition | Subscribe