Keppel's settlement deal over frozen multi-billion-dollar Brazil rig jobs takes effect

Shares of Keppel rose 1 per cent or five cents to close at $5.30 on Oct 13, before the announcement. PHOTO: KEPPEL CORP

SINGAPORE (THE BUSINESS TIMES) - Keppel Corp's settlement agreement with troubled Brazilian company Sete Brasil, inked two years ago and relating to multi-billion-dollar frozen rig jobs, is now effective.

The engineering, procurement and construction (EPC) contracts for six oil drilling rigs will be deemed to be amicably terminated, with no penalties or refunds due to any party, Keppel said in a bourse filing on Wednesday (Oct 13) evening.

Keppel Offshore & Marine (Keppel O&M) subsidiary Fernvale will also have full title and ownership to four rigs.

Meanwhile, a sum of about US$259.5 million (S$350.7 million) under the outstanding invoices from Fernvale, issued under the EPC contracts with Sete Brasil units Urca and Frade, will be recognised as an undisputed debt due and owing by the two units. The sum will also be recognised as part of the debt under the judicial reorganisation plan.

Certain conditions precedent will be de-coupled from the settlement agreement, to allow for the settlement to take effect immediately, Keppel said.

These conditions precedent are Sete Brasil's disposal of its entire shareholding in Urca and Frade, as well as the release of certain securities that creditors of Urca, Frade, Bracuhy, and Portogalo may hold.

Keppel, Fernvale and FELS Offshore continue to be in discussions with the Sete entities in relation to both conditions precedent.

In October 2019, Keppel O&M subsidiaries reached the long-awaited settlement with Sete Brasil, once their biggest customer, for drillship and rig-building contracts that were frozen after Sete Brasil was forced to file for bankruptcy amid Brazil's sweeping corruption probe.

The settlement deal sparked hopes of potential write-backs and order-book upsides, The Business Times (BT) reported then.

On Wednesday (Oct 13), Keppel noted that the settlement agreement will not result in additional provisions nor have any material impact on the company's net tangible assets and earnings per share for 2021.

Shares of Keppel rose 1 per cent or five cents to close at $5.30 on Wednesday, before the announcement.

Join ST's Telegram channel and get the latest breaking news delivered to you.