Punj Loyd sees Cash Outlow of Rs 250 crs in it’s UK Subsidiary as Client SABIC encashes Bonds

 

 

Punj Loyd is facing a serious Problem in it’s wholly owned subsidiary in United Kingdom It has seen a  Cash Outflow of Sterling Pounds 28.5 Million which translates to @ Rs 250 crs on encashment of Bonds by SABIC…The Subsidiary,Simon Carves Ltd has filed a Case against SABIC

In a Growing Global Recession…UK has already admitted to going through one….such Bonds are Like Time Bombs as Clients, to get out of Contracts,may accuse of some breach ,and encash Bonds to prop up their Liquidity and take the risk of inviting lawsuits 

The Share Price of Punj Loyd has reacted sharply by over 12% to Rs 116 levels (2.30 PM)

Wonder if Punj Loyd or it’s subsidiaries has issued any more such Bonds on Contracts being executed which they fear may too be called by Clients…..Specific Disclosures giving Details on Bonds should be made mandatory in the Annual Report in the Notes to Accounts for Contingents ,instead of just giving an Aggregate…This would be Crucial Data for an Investor,who can take a call to exit early if he reads in the Media or comes to know of Problems in Specific Contracts and fears that The Bond may be encashed by the Client.

Have a look at the notice it send to BSE and NSE this morning

 

 ___________________________________________________________________________

January 09, 2009

 

 

Disclosure pursuant to the Listing Agreement

Pursuant to its obligations under the Listing Agreement, the Company wishes to inform

you that its wholly-owned UK subsidiary, Simon Carves Limited (“SCL”), has commenced

adjudication proceedings against SABIC Petrochemicals UK Limited (“SABIC”). These

proceedings are ultimately aimed at seeking restitution, through the U.K. Courts, of £28.5

million (pounds sterling) in respect of an advance payment bond and a performance bond

called by SABIC following in SCL’s view, the wrongful termination by SABIC of the contract

between SABIC and SCL. Additional costs and damages will also be sought by SCL

against SABIC associated with cost overruns in the project caused by changes in scope

and design requested by SABIC and also to recover damages for losses arising as a

consequence of the termination of the contract.

SCL had contracted with Huntsman Petrochemicals (UK) Limited (subsequently acquired

by SABIC) in early 2006 to design, build and pre-commission a 400 kte per annum low

density polyethylene plant (“LDPE”) at Wilton, Teeside in the UK. This contract was

entered into between SCL and SABIC prior to the acquisition of SCL by Punj Lloyd in May

2006. After completion of the initial front-end engineering design works for the proposed

plant, the contract was converted into a lumpsum engineering procurement and

construction contract. SABIC recently terminated the contract on the basis that, inter alia,

SCL failed to undertake completion of the contractual works with due diligence. This

allegation is strongly denied by SCL on the basis that the project is significantly complete

and was on track to be fully completed in accordance with the requirements of the contract

and within the relevant scheduled completion date specified in the contract with SABIC.

SABIC has called the performance and advance payment bank guarantees issued by SCL

amounting to £28.5 million (pounds sterling).

SCL intends to defend its claims vigorously.

Thanking you,

Yours faithfully,

for

 

 

 

 Punj Lloyd Limited

Dinesh Thairani

Company Secretary 

 

 

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